Financial Analysis - Apple Inc

Contents
Page
Executive Summary ........................................................................................................................... 2
Industry Analysis ................................................................................................................................ 3
Porters Five Forces Analysis ..................................................................................................... 3
Threats of New Entry .............................................................................................................. 3
Rivalry between existing firms ........................................................................................... 3
Threat of Substitute Products .............................................................................................. 4
Bargaining Power of Suppliers ............................................................................................ 4
Bargaining Power of Buyers ................................................................................................. 5
Business Strategy Analysis ............................................................................................................. 5
Competitive Strategy .................................................................................................................... 5
SWOT Analysis ................................................................................................................................ 6
Strengths ....................................................................................................................................... 6
Weaknesses ................................................................................................................................. 6
Opportunities .............................................................................................................................. 6
Threats ........................................................................................................................................... 7
Value Chain Analysis ..................................................................................................................... 7
Accounting Analysis ........................................................................................................................... 8
Key Accounting Principles ......................................................................................................... 8
Assessment of Accounting Flexibility .................................................................................... 8
Evaluation of Accounting Strategy & Potential Red Flags ............................................ 8
Apple’s Tax Strategy ................................................................................................................ 8
R&D Capitalisation ........................................................................................................................ 9
Change in Accounting Policy ............................................................................................. 10
Deferred Revenue .................................................................................................................. 10
Corporate Governance ......................................................................................................... 11
Evaluation of Quality of Disclosure ..................................................................................... 11
Investor Relations .................................................................................................................. 11
Audit Control ............................................................................................................................ 11
Financial Analysis ............................................................................................................................ 12
Return on Equity (ROE): .......................................................................................................... 12
Return on Capital Employed (ROCE) .................................................................................. 13
Research and Development Efficiency .............................................................................. 14
Current Ratio ................................................................................................................................ 14
Average Revenue Per Store .................................................................................................... 15
Earnings Per Share (EPS) ........................................................................................................ 15
Prospective Analysis ....................................................................................................................... 16
Discounted Cash Flow (DCF) Model ................................................................................... 16
Free Cash Flow to Equity (FCFE) ..................................................................................... 16
CAPM ........................................................................................................................................... 18
WACC ........................................................................................................................................... 18
Terminal Value ........................................................................................................................ 19
DCF Calculation ....................................................................................................................... 19
Dividend Discount Model (DDM) ......................................................................................... 20
Dividend Per Share (DPS) Forecast ................................................................................ 20
Gordon Growth Model ......................................................................................................... 20
Terminal Value ........................................................................................................................ 20
Conclusions and Recommendations ........................................................................................ 21
1
Executive Summary

Our aim is to produce a critical analysis of the strategic and financial position of
Apple Inc, utilising real data and information that is in the public domain. The
purpose of which is to use the analysis to develop a valuation of Apple Inc. in order
to make an investment recommendation based upon the current real value of the
company.

Apple Inc. is an American multinational corporation that designs and manufactures
consumer electronics, computer software and service and personal computers, with
headquarters in Cupertino, California. The company's best-‐known hardware
products include Macintosh computers, the iPod, the iPhone and the iPad. Apple’s
software includes iTunes, iOS and the Mac OS X operating system.

Established on April 1, 1976, by Steve Jobs, Steve Wozniak and Ronald Wayne, Apple
has grown into the second-‐largest information technology company in the world,
with revenue exceeding $182 billion and over 98,000 employees worldwide.

Apple has three main products and therefore operates mainly in three different
markets. These three markets are the smartphone market, the tablet market and the
personal computer market.

Apple’s innovative and differentiated strategy has turned the company into an
industry leader. Apple’s differentiation strategy might have kept its loyal customers
insensitive to premium prices, it will not however be a sustainable and long lived
strategy if it is outperformed at any point in time by a competitor.

Using a range of real world data from data stream and Apples 10-‐K report, we used
ratios to check performance of Apple against competitors, industry and itself over
time.

Our report concludes with a strong buy recommendation for Apple Shares and
suggests that the current share price is undervalued.
2

Apple Inc. Financial Analysis, March 2015

Industry Analysis
Porters Five Forces Analysis

Using Porters Five Forces framework to analyse the level of competition within the
electronics industry, it is clear that Apple are market leaders in an evolving, fast-‐
paced environment. By utilising industrial organization economics, we can conclude
that the electronics industry is incredibly competitive but the opportunity to grow
and become profitable is continuously acting as a magnet for wider competition.
Threats of New Entry

Apple is a dominant force in the electronics industry, renowned by most to produce
the ultimate electronic goods. This is partially down to their extensive R&D
expenditure, which continues to break boundaries and innovate beyond competitive
reach. Apple’s very own production based economies of scale is a limiting factor for
competition as they are becoming more capable of producing at cost. Apple’s blend
of extreme quality and now cost leadership dominance will make it ever harder for
new firms to enter the market and successfully compete.

However, some would argue that the extreme profitability acts as a magnet for fresh
competition. New players have emerged such as Android, an open source alternative
to Apple’s high-‐end software.
Rivalry between existing firms

Branding is the most fundamental differentiating factor when consumers make
purchasing decisions in this aggressively competitive industry growing at an
estimated 4.1%1 in 2015, closely followed by product value. Apple’s focus on quality
and innovation has set them apart from rivals as consumers faithfully return to
purchase their products which are closely amalgamated by Apple’s iCloud, a unique
customer storage platform which syncs devices and products. This ties consumers
into an “only Apple” mentality, restricting existing firms from gaining market share.
Although hundreds of firms compete for their piece of an extremely lucrative pie,
the concentration ratio of major market leaders is actually rather small, consisting of
3


just 5 players: Apple, Samsung, Dell, HP and Sony. Apples’ economies of learning and
scale across the world are another reason that they persist to be market leaders.

Despite Apple attempting to protect their intellectual property, imitations of
products are widespread, produced by existing players including Xiaomi, which have
similar functions and appearance but for a reduced price, made possible by the
widened availability of technology, seizing any excess capacity in the industry.
Threat of Substitute Products

Apple’s focus on extreme quality and style makes it difficult for competition to
succeed. Elevated marketing spend mixed with durable, stylish and high performing
products are the core reasons for Apples continued growth. In Apples mobile phone
division, consumers are often tied into 24-‐month contracts1, making it difficult for
them to switch to alternative products during a legally binding contract. Apple also
strategically updates hardware and software annually to maintain a functional
competitive advantage over substitute products. Further to this, Apple ensures
longevity, building products with extreme quality, restricting the need for consumers
to consider alternative, substitute products. Additionally, Apple operates the perfect
cross-‐selling strategy, each of its products are closely integrated; therefore
purchasing an alternative, non-‐Apple branded piece of hardware, would be
considered incompatible with other Apple devices.
Bargaining Power of Suppliers

With over £150bn1 in treasury and a large experienced negotiations team, suppliers
are threatened by Apple’s power and dominance. Apple produces over 72 million1
iPhones each year, a great opportunity for any of its suppliers involved in the vertical
production chain. Apple operates in a fiercely competitive industry with minimal
gross margins; therefore supplier contracts will be competitive. Suppliers are also
highly reliant on Apple’s custom. Cirrus Logic, a manufacturer of circuit boards,
booked 82%10 of their revenue from just Apple and could be under pressure as Apple
seeks cheaper alternatives. Conversely, Apple is subject to stress from competitors
4


who produce vital components used in the iPhone and iPad, such as Samsung who
received over $10bn in 20148.
Bargaining Power of Buyers

Apple’s focus on high-‐end quality and persuasive marketing has amplified the
switching costs for consumers. By offering variations of the same product for
different prices, Apple can cater for a wide consumer base, reducing price sensitivity.
Apple has also developed a platform intertwined into its software, which most
customers have grown to rely on and therefore limiting individual bargaining power.
Business Strategy Analysis
Competitive Strategy

Based on Porter's generic strategies, Apple operates a well-‐defined differentiation

strategy. This therefore makes it both difficult and expensive to replicate and shift
market share. To achieve this, Apple has focused its resources on three aspects of
the business:

-‐ R&D Expenditure to maintain it’s novelty and momentum – $6.041bn1
-‐ Production and Delivery of high-‐quality and unique products and services –
IPod, IPad and the Apple Watch
-‐ Marketing and Sales to create awareness and desire for its unique products –
437 Retail stores across the world, an increase from 390 in 20121

This differentiation strategy is only effective when the target customer is not price
sensitive and the company possesses unique capabilities and resources. In Apple’s
case, these include a portfolio of patents, unique technical abilities such as their
design team led by award winning Jonathan Ive, their innovative processes and
finally their obsessive focus on first class customer service. In order to evaluate
internal and external factors leading towards this differentiation strategy, we have
conducted an in depth SWOT analysis.
5


SWOT Analysis
Strengths

Apples dominating marketing and advertising strategies outperform others in the
industry. In 2013, despite spending only 0.64% of total revenue on advertising
compared to 1.75%2 at Samsung, Apple’s market share grew considerably faster and
its brand value is the most prominent in the world, estimated to be worth $124.2bn2

Steve Jobs’ visionary leadership and focus on innovation has been embedded in the
company culture. Apple’s disruption has created a powerful tailwind generating a
steady stream of consistent income and growth for the company in future years.

Apple’s strong financial position has been highlighted by the accumulation of
substantial capital. With $38bn in cash assets and $127bn1 in long-‐term marketable
securities, Apple has the ability to acquire established market leading firms such as
Beats Electronics and dividend payouts since early 2012 of up to $0.87 per share1.
Weaknesses

Apple’s strategy is reliant on premium pricing even though the industry as a whole is
cost sensitive. This luxury focus has caused concern as Apple fail to acquire
significant market share in the Chinese market due to price competition from cost
leaders such as Xiaomi who offer similar product functionality for discounted price.

The life cycle of Apple’s products is diminutive, demonstrated by a sharp fall in
shipments of IPads by 9%9 between Q4 2013 and Q4 2014, as the tablet market
contracted. The ruthless drive of the industry to produce updated and improved
products has resulted in devices becoming outdated. In its attempts to maintain its
position by innovating incrementally, Apple has been critisied for failing to provide
radical innovation as they have done previously.
Opportunities

Apple seeks to reproduce its customer loyalty in the Eastern markets as part of its
expansion plan. It plans to open 25 new stores in the next two years and has formed
new strategic deals with mobile service providers.
6


Apple currently hosts a proliferate number of active patents helping to sustain a
long-‐term competitive advantage. By selecting and investing in promising future
revenue streams such as Beats Electronics, Apple can spread their risk and provide
assurance of stability.
Threats

The technology industry is exceptionally crowded with multiple competitors cutting
into Apple’s market share. Apple is susceptible to aggressive price competition from
low-‐cost, mass producers such as Xiaomi due to the saturation of technology. Access
to cheaper materials and the expiry of many pre 1990s patents has indorsed
competition to aggressively contest.

Increasingly aggressive competition, product and component shortages have caused

concerns for cost controllers, which has limited margins and impacted profit lines.
Given the economic conditions and growing price sensitivity, high profit margins are
less viable in the long-‐term.

Google’s Android operating system as well as Windows and Blackberry’s are growing
in popularity, representing 80.3%6 of the operating platform market share. Asian
markets are particularly fond of the alternative operating system, which has become
cross compatible with watches, cars and enterprise systems.
Value Chain Analysis

It is clear from analysing Apple’s value chain that a differentiation strategy is
present. For most companies, R&D would be classified as support activity, but for
apple, R&D was a driving force. Apple’s support activities include: customer service,
supply chain management (inbound and outbound logistics), and design.
Marketing and sales activities also added value to Apple’s value chain by selling a
“way of life” rather than a product. Apple’s capabilities and resources: “designing its
own products from scratch”, using unique and simple designs that are “user friendly”
also create distinct long-‐term value for customers.
7


Accounting Analysis
Key Accounting Principles

According to Apple’s annul report; policies related to “revenue recognition, valuation
and impairment, inventory valuation, warranty costs, income taxes, and legal
policy1” are of upmost importance to the corporation. An example of another key
accounting principle, listed in the 10-‐K annual report, is Apple’s Goodwill and
Intangible assets policy. Long-‐lived PPE are reviewed for impairment whenever
external events or changes in circumstances indicate the carrying amount of an asset
may not be recoverable. Apple insists that assets are required to be tested for
impairment at least annually.
Assessment of Accounting Flexibility

For a company of Apple’s size, there can be a number of situations where substance
over form is an important consideration when applying strict accounting policies. An
example of this is the decision to treat a lease as finance or operating that can be
subject to interpretation. This interpretation will determine whether the lease sits
on or off the balance sheet. Another example is the treatment of R&D and whether
research can be classified under the standard to be capitalisable. These principles
require management to make estimates and judgements about inherently uncertain
manners and can often lead to accounting error if they are not managed accordingly.
Evaluation of Accounting Strategy & Potential Red Flags
Apple’s Tax Strategy

From 2009 through to 2012, Apple shielded $74 billion6 in profits from taxation by
exploiting two offshore shell subsidiaries located in Ireland; Apple Operations
International (AOI) and Apple Sales International (ASI). Between 2009 and 2012, AOI,
incorporated in Cork Ireland, produced $30 billion in profits but paid no tax.
Meanwhile, ASI earned $38 billion during this period and paid a paltry $21 million in
taxes, an effective tax rate of 0.06%11. These actions strongly correlate to those of
Starbucks and Google, both companies under scrutiny over their elaborate tax
8


avoidance schemes. Although tax avoidance is not illegal, it is seen by many as
“operating within the letter rather than by the spirit of the law”7.

Despite widespread negative perception and the potential risk of penalties, Apple
has continued to take advantage of another tax loophole in respect to its intellectual
property, which makes up a large proportion of Apples’ value. When an Apple
product is purchased anywhere in the world, the consumer is effectively buying a
piece of Apple’s intellectual property. Apple’s intellectual property is situated in the
United States, where its research and development is conducted and where the
corporate tax rate is 35%11. However, Apple avoids paying the high tax rate by
sharing the R&D cost with its Irish subsidiaries; constituting a similar effect to
parking intellectual property in a tax haven. This process is referred to as a ‘Double
Irish with a Dutch Sandwich’, a popular technique exploited most prominently by
tech companies. This cost-‐sharing agreement involves Apple’s Irish subsidiary
companies making trivial annual payments to the parent company for use of its
intellectual property, whilst accumulating vastly more than that amount in sales
revenue from other Apple affiliates.

As of January 2015, the U.S. government planned to close the Double Irish tax
mechanism to new entrants, but existing multinationals such as Apple will be
allowed to maintain their existing schemes until the end of 2020. Therefore we can
conclude that Apple’s bottom line profits may be substantially constricted in the long
term, which creates uncertainty for investors. However, one would argue that
Apple’s experienced finance team will instead manipulate another loophole to avoid
paying due taxes. Ethically, Apple’s public image as a premium brand could be at
stake as they continue to manipulate laws to selfishly improve profits.
R&D Capitalisation

Aswath Damodoran8 states “capital expenditures are defined as those
expenditures that are likely to create benefits over multiple periods”. Due to the
nature of Apple’s business, and that arguably a significant chunk of their future
revenues relates to R&D, we have made the decision to capitalise their R&D
9


expenses. Our first calculation is to estimate how long it takes for Apple’s
respective R&D costs to be converted into commercial products7. This will
determine the amortisable life of the corresponding assets. We believe the most
accurate way to do this is to observe the amount of time it takes for the newer
version of each product to be released; for example iPhone 3Gs to iPhone 4. Upon
completion of these observations, we found the average amount of time to be
within one year. Hence, the effect on capitalising R&D will see an increase in
Operating Income and Net Income by the R&D amount in each corresponding
year, as we will not be amortising over multiple periods.
Change in Accounting Policy

Since the release of the iPhone in 2007, Apple announced it would book revenue
from iPhones in a contentious manner. Instead of recognizing revenue at the date of
sale, revenue would be spread over the life of the device. This enabled Apple to offer
future unspecified features and additional software products free of charge to the
customer. The practice was designed to ensure that revenue wasn't counted ahead
of delivering the full product. Therefore, in accordance with GAAP, Apple would
recognize iPhone sales over a straight-‐line basis, recognizing one eighth of the
revenue per quarter. Initially investors struggled to grasp the repercussions of
Apple’s accounting policy, incorrectly assessing their performance in quarterly
reports, resulting in a drop in share price. In 2009, Apple together with other major
multinationals, petitioned for, and were granted, a change in the accounting policy
requiring them to register revenue for iPhones on a subscription accounting basis.
The FASB, the entity responsible for determining accounting standards in the United
States, unanimously approved the conversion, which increases the percentage of
revenue recognized at the point of sale to close to 90% from the prevailing 12.5%3.
The result was a staggering increase in quarterly revenue, rising from $9.87 billion in
its fiscal 2009 fourth quarter to $15.68 billion in its fiscal 2010 first quarter3.
Deferred Revenue

As a result of its subscription accounting practice, Apple currently holds $11.5 billion1
of deferred revenue. Its accrual basis accounting means Apple could defer the
10


reporting of revenue on tax returns, which means that more cash is available for
longer periods of time and can be used to invest or pay operating expenses. As a
consequence, the revenue numbers most analysts are looking at are far lower than
what Apple is really making, leading to investors underestimating Apple’s
performance and therefore its share price being undervalued.
Corporate Governance

Apple’s corporate governance structure is designed to be a working structure for
principled actions, effective decision-‐making and appropriate monitoring of both
compliance and performance.
Evaluation of Quality of Disclosure
Investor Relations

Companies that are publicly owned are subject to detailed disclosure laws about
their financial condition, operating results, management compensation, and other
areas of their business as enforced by SEC. Apple, who have recently become one of
the most profitable companies of all time, are no different and hold quarterly
earnings releases, publicly available on Apple’s Investor Relations dedicated
webpage. Despite Apple being transparent with their financial releases, investors are
somewhat left in the dark when it comes to Apple’s product releases; details of
which are tightly controlled by senior management.
Audit Control

Ernst & Young (EY), in accordance with the PCAOB, have conducted a comprehensive
audit of the financial statements and concluded, “the accounts are true and fair1”.
Apple are to review their auditors this coming year as EY’s audit period has expired.

Having analysed Apple’s accounting policies and procedures, we have found no
discrepancies amongst Apple’s accounting statements. Whilst there are some
actions that are questionable, the legality of these actions is indisputable. Moreover,
Apple abides by GAAP standards and FASB rulings and consequentially there are no
amendments to be made to the earnings or financial statements.
11


Financial Analysis

Return on Equity (ROE):

Return on Equity (ROE) illustrates the net income returned as a percentage of
shareholders equity. Return on equity measures a corporation's profitability by
calculating the profits generated investments.

𝑁𝑒𝑡 𝑃𝑟𝑜𝑓𝑖𝑡
𝑅𝑂𝐸 =
𝑆ℎ𝑎𝑟𝑒ℎ𝑜𝑙𝑑𝑒𝑟𝑠 ! 𝐸𝑞𝑢𝑖𝑡𝑦

= 𝑅𝑂𝐴 × 𝐸𝑞𝑢𝑖𝑡𝑦 𝑀𝑢𝑙𝑡𝑖𝑝𝑙𝑖𝑒𝑟
Apple ROE 2012 -‐ 2014

45.00%
40.00%
35.00%
30.00%
25.00% Adjusted
20.00%
15.00% Unadjusted
10.00%
5.00%
0.00%
2012 2013 2014
The rise in ROE from 33.60% to 40.84% between 2013 and 2014 was due to a
significant increase in the equity multiplier from 171.17% to 213.26%, a reduction in
shareholder’s equity and finally a surge in total assets.

ROE Compeoove Analysis 2012 -‐ 2014

50
40
30
20
10 2012
ROE (%)
0 2013
Apple Lenovo HP Google Samsung Amazon Acer
-‐10 2014
-‐20
-‐30
-‐40
-‐50
12


The chart above is a comparison of Apple’s ROE with a range of major competitors.
Apple outperforms competition based on ROE thus proving that Apple management
is employing the capital provided by their investors more effectively than others.
Return on Capital Employed (ROCE)

ROCE is an enhanced version of the ROE ratio as it as analyses how well a firm uses
both its debt and equity to generate a return. It computates the number of dollars
profit each dollar of capital employed generates, allowing for a better understanding
of the company’s ability to generate revenue from its available capital.
𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑃𝑟𝑜𝑓𝑖𝑡
𝑅𝑂𝐶𝐸 =
𝑆ℎ𝑎𝑟𝑒ℎ𝑜𝑙𝑑𝑒𝑟𝑠 ! 𝐸𝑞𝑢𝑖𝑡𝑦 + 𝐿𝑜𝑛𝑔 𝑇𝑒𝑟𝑚 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠

𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑃𝑟𝑜𝑓𝑖𝑡 𝑆𝑎𝑙𝑒𝑠 𝑅𝑒𝑣𝑒𝑛𝑢𝑒

= ×
𝑆𝑎𝑙𝑒𝑠 𝑅𝑒𝑣𝑒𝑛𝑢𝑒 𝐿𝑜𝑛𝑔 𝑇𝑒𝑟𝑚 𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝐸𝑚𝑝𝑙𝑜𝑦𝑒𝑑

Apple ROCE from 2012 -‐ 2014

50.00%
45.00%
40.00%
35.00%
30.00%
25.00% Adjusted
20.00% Unadjusted
15.00%
10.00%
5.00%
0.00%
2012 2013 2014
ROCE Compeoove Analysis 2012 -‐ 2014

50.00%
40.00%
30.00% Apple
HP
20.00%
Google
10.00%
0.00%
2012 2013 2014
13


Using the annual reports, we calculated the ROCE for Apple, HP and Google over the
past three years. As is evident from the chart, Apple consistently displays more
efficient usage of its capital employed and demonstrates a higher return per dollar
invested.
Research and Development Efficiency

The R&D as a proportion of total revenue can be used to compare the effectiveness
and efficiency of R&D expenditures between companies in the same industry. This is
especially true in the industries that Apple operates in, as R&D is detrimental to the
success of their products.
!&! !"#$%&'()*$
𝑅&𝐷 𝐸𝑓𝑓𝑖𝑐𝑖𝑒𝑛𝑐𝑦 = !"#"$%"

R&D Eﬃciency Compeoove Analysis 2012 -‐ 2014

7.00%
6.00%
R&D Eﬃciency )%)
5.00%
4.00% 2012
3.00% 2013
2.00% 2014
1.00%
0.00%
Apple HP Samsung Lenovo
As the chart above indicates, Apple’s efficiency in terms of R&D expenditure is
extremely competitive with their immediate competitors. However, observing this
data emphasises that their efficiency has decreased since 2012, as the higher the
ratio, the more inefficient the firm. This is due to the recent R&D for moonshot
projects such as the Apple Watch and Apple Car, which examples the relatively high
costs of movement into a new market.
Current Ratio

This ratio gives the investor an indication of the company’s ability to pay back its
short-‐term liabilities with its short-‐term assets.
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡𝑠
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑅𝑎𝑡𝑖𝑜 =
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
14


Apple’s Current Ratio (CR) for 2014 is above 1 (1.08), which suggests that they are
capable of paying off their obligations at this moment in time; they have seen a
decrease of roughly 0.42 between 2012 and 2014. This proves the potential danger
of it CR dropping below 1 in the near future. In comparison with Apple’s close
competition, they have a below-‐average Current Ratio. However, we do not believe
this is significant as profitability of the firm or the quality of the current assets is
ignored.
Average Revenue Per Store

𝑅𝑒𝑡𝑎𝑖𝑙 𝑅𝑒𝑣𝑒𝑛𝑢𝑒
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑅𝑒𝑣𝑒𝑛𝑢𝑒 𝑃𝑒𝑟 𝑆𝑡𝑜𝑟𝑒 =
𝑇𝑜𝑡𝑎𝑙 𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑆𝑡𝑜𝑟𝑒𝑠

This calculation highlights Apple’s retail efficiency. From 2013 to 2014 the average
revenue per store increased by 5.87%, whereas the number of retail stores only
increased by 5.08%, showing that Apple’s expansion is paralleled to retail store
growth and has not had a detrimental effect on their efficiency.
Earnings Per Share (EPS)

EPS Compeoove Analayis 2012 -‐ 2014

25
20
15
2012
EPS ($)
10
2013
5
2014
0
Apple HP Google Amazon Lenovo
-‐5
-‐10

Earnings per share is an indicator of a company’s profitability, exposing how profits
are allocated to each outstanding share of common stock. Apple has a relatively high
and consistent EPS compared to that of competition. This indicates that it is a stable
and profitable investment opportunity.

15

Financial Analysis - Apple Inc

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Financial Analysis - Apple Inc

Uploaded by

Copyright:

Available Formats

Contents

Porters Five Forces Analysis

Threats of New Entry

Rivalry between existing firms

Threat of Substitute Products

Bargaining Power of Suppliers

Bargaining Power of Buyers

Business Strategy Analysis

Based on Porter's generic strategies, Apple operates a well-­‐defined differentiation

Increasingly aggressive competition, product and component shortages have caused

Value Chain Analysis

Key Accounting Principles

Assessment of Accounting Flexibility

Evaluation of Accounting Strategy & Potential Red Flags

Apple’s Tax Strategy

Change in Accounting Policy

Evaluation of Quality of Disclosure

= 𝑅𝑂𝐴 × 𝐸𝑞𝑢𝑖𝑡𝑦 𝑀𝑢𝑙𝑡𝑖𝑝𝑙𝑖𝑒𝑟

Apple ROE 2012 -­‐ 2014

ROE Compeoove Analysis 2012 -­‐ 2014

Return on Capital Employed (ROCE)

𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑃𝑟𝑜𝑓𝑖𝑡 𝑆𝑎𝑙𝑒𝑠 𝑅𝑒𝑣𝑒𝑛𝑢𝑒

Apple ROCE from 2012 -­‐ 2014

ROCE Compeoove Analysis 2012 -­‐ 2014

Research and Development Efficiency

R&D Eﬃciency Compeoove Analysis 2012 -­‐ 2014

Average Revenue Per Store

Earnings Per Share (EPS)

EPS Compeoove Analayis 2012 -­‐ 2014

You might also like

Based on Porter's generic strategies, Apple operates a well-‐defined differentiation

Apple ROE 2012 -‐ 2014

ROE Compeoove Analysis 2012 -‐ 2014

Apple ROCE from 2012 -‐ 2014

ROCE Compeoove Analysis 2012 -‐ 2014

R&D Eﬃciency Compeoove Analysis 2012 -‐ 2014

EPS Compeoove Analayis 2012 -‐ 2014