Apple Inc. (AAPL) is one of the world’s largest makers of PCs and peripheral and consumer products, such as the iPod digital music player, the iPad tablet, the iPhone smartphone, and the Apple Watch. Majority of Apple’s revenue come from business, creative, education, government, and consumer markets. Apple also sells operating systems, services like iCloud storage and Apple Pay, and a host of digital content from the popular iTunes store and other portals. This week, I fundamentally analyze Apple’s stock. I review AAPL’s operating segments, look at its key ratios, derive the intrinsic value using Discounted Cash Flow (DCF) analysis, and calculate the expected rate of return from this investment. Since this is a long video, please feel free to use the time stamps in the video if you only wish to watch certain topics.
I review various key ratios such as Revenue, Net Income, Shares outstanding, Dividends, Payout Ratio, Free Cash Flows (FCF), Financial Leverage, Current Ratio, Debt to Equity Ratio, Return on Equity (ROE), Days Sales Outstanding (DSO), Days Inventory, Payable Period, Cash Conversion Cycle, Inventory Turnover, etc.
After taking into account 2020’s free cash flow of $73,365 million figure, a 9% growth rate of FCF (growth for the next 10 years), 10% discount rate, 5% long term growth rate (growth from 10 year mark to perpetuity), 17,180 million shares outstanding, and $98,667 million of long term debt, the DCF analysis yields us an intrinsic value of $116 per share. If we drop the discount rate from 10% to 9%, the intrinsic value comes to $149 per share. Using the current stock price of about $130 per share, and taking into the shares outstanding and future projects of free cash flows, we get the annual expected rate of return to be 4.2% if we hold this security through 2060.
0:41 Business Segments / Business Overview
3:17 Key Ratios Analysis
14:12 Discounted Cash Flow Analysis / Intrinsic Value
16:28 Expected Rate of Return Calculation
17:31 Summary / Conclusion
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Apple’s Website: here
Morningstar Key Ratios Link: here.
Useful Resources here.
Apple Inc. is an American multinational technology company headquartered in Cupertino, California, that designs, develops, and sells consumer electronics, computer software, and online services.
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