To: Christopher Thacker, Managing Partner

From: Diyoraoy Chorshanboeva, Junior Accountant

Date: 11/08/2018
Subject: Financial Analysis Demonstrates Apple’s Efficient Growth

As per your request, I directed a comparative financial analysis of Microsoft to a

competitor of my choosing. I selected Apple because it is a direct competitor in
the devices market. As a result of my examination, I found that while both
companies are growing, Apple is more efficient at generating growth. This
conclusion was reached by higher earnings-per-share, and ability to maintain
growth.
Apple Competes Through Its Hardware
Apple is an apt competitor for this analysis because it is a very recognized brand,
and “64% of Americans own Apple product” (Liesman, 2017, para 1). Apple has
been a leader in the devices market as the originator of smartphones, while
Microsoft is the largest software maker. Today, however, Microsoft has its
laptops and Microsoft software-based phones.

Data Show That Apple is Growing Better

In Table 1. the data shows that both companies are growing; however, Apple
generates more growth than Microsoft as indicated by EPS.

Table 1. Indices Contributing to Growth

Indices Microsoft Apple

Earnings-per-share $2.11 $11.03

Quick Ratio 2.88 1.23

$12.193 billion (2015) $53.394 billion (2015)
Net Income
$25.489 billion (2017) $48.351 billion (2017)
Price-to-earning 49.94 19.67
35% grow in price 32% grow in price
Stock price
15% off the targeted price 10% off the targeted price
Note. Microsoft and Apple Financial Data. Retrieved from “Microsoft Financial
Index Data” and “Apple Financial Index Data” 2017(b, a) NASDAQ
Apple has a significantly high earnings-per-share. It is at $11.03
compared to Microsoft’s $2.11 (NASDAQ, 2017a; NASDAQ, 2017b). However,
a side-by-side comparison does not tell the whole story. When looking at the
number of shares outstanding, Microsoft’s EPS is achieved through a higher
number of shares outstanding at 7.708 billion (Clark, 2017). Whereas, Apple
achieves a high EPS with a relatively low number of shares outstanding at 5.134
billion (Hellman, 2017). Analysis based on Earnings per-share showed that Apple
is significantly more efficient at generating income.
Apple is healthier in generating growth. Both Apple and Microsoft can
liquidate assets to cover their short-term liabilities. Apple’s quick ratio is well
below the industry average of 1.23; meaning that it is spending capital to maintain
growth in the long run making investments (NASDAQ, 2017a). In contrast,
Microsoft’s quick ratio of 2.88 exceeds the standard, indicating the company may
be experiencing top-line growth by having a lot of short-term investments
(NASDAQ, 2017b). Microsoft was not making a lot of long-term investments to
have reservations for the future, so it has more cash on hand than Apple, which
makes Apple more efficient in generating growth (NASDAQ, 2017b; NASDAQ,
2017b).
Apple is making higher profit. Net-income growth for Microsoft and Apple
contrast heavily. Apple’s net income has declined by 10.4% from $53.394 billion
(2015) to $48.351 billion (2017) (NASDAQ, 2017a). Microsoft posted a net
income growth of 51.4% from $12.193 billion (2015) to $25.489 billion (2017)
(NASDAQ, 2017b). While Microsoft’s growth has been robust due to “continued
experiencing strong demand for its cloud infrastructure and related platform
services (e.g., Azure), as well as from cloud-based productivity offerings Office
365 (in both the commercial and consumer markets) and Dynamics 365”
(Clark,2017, para1), Apple’s decline shows signs of inefficiency at generating
income. This is possibly due to “Apple hadn't seen its smartphone business
shrink since 2016 when the firm reported its first annual drop in smartphone sales
since the iPhone's 2007 debut”(Tsukayama, 2018, para8).
Apple is a better company and growing more stable. Apple and
Microsoft have significantly different price-to-earnings ratios at 49.94 and 19.67
respectively (NASDAQ, 2017b; NASDAQ, 2017a). Microsoft’s share is much
higher the industry average of 27.8, demonstrating that inventors feel that
Microsoft company expects high growth in the future. Whereas Apple’s share is
lower than standard, it shows that the company is a more stable investment than
the industry as a whole.
Apple’s stock price is growing higher. Microsoft and Apple have
experienced growth in stock price. Microsoft’s stock price has grown 35%
compared to Apple’s for 32% in a year from October 2017 untill October 2018
(NASDAQ, 2018b; NASDAQ, 2018a). Although Microsoft’s stock price had
increased more than Apple’s; when the last closing price was compared to
targeted price, Apple was off for 10% and Microsoft for 15% which shows that
Apple’s stock is growing more (2017a; 2017b).
I Would Like to Talk About My Analysis
Based on the analysis, both companies are growing; however, Apple is more
efficient at generating growth. Therefore, Apple is a better investment compared
to Microsoft. If you have any questions, or if you would like to meet to discuss
my financial analysis, please feel free to contact me at
dchors1@students.towson.edu .
 References
NASDAQ. (2017a). [Table Apple Financial Indices October 10, 2017]. Apple
Financial Index Data from NASDAQ.
Retrieved from http://www.nasdaq.com/symbol/aapl

NASDAQ. (2017b). [Table Google Financial Indices October 10, 2017]. Microsoft
Financial Index Data from NASDAQ.
Retrieved from http://www.nasdaq.com/symbol/msft
Hellman, J. (2017, December 29). Apple Inc. Value Line Report. Retrieved from
https://research.valueline.com/api/report?documentID=2185-
VL_20171229_VLIS_AAPL_172_01-
2OVFQD9DJVKBP8A9UTF36USGKJ&symbol=AAPL
Clark, C. (2017, August 11) Microsoft Corp. Value Line Report. Retrieved from
https://research.valueline.com/api/report?documentID=2185-
VL_20170811_VLIS_MSFT_3305_01-
1V9ELFLPIE99LVKNTEPJRFLP1A&symbol=MSFT
Liesman, S. (2017, October 10, para 1) All-America Economic Survey.
Retrieved from https://www.cnbc.com/2017/10/09/the-average-american-
household-owns-more-than-two-apple-products.html
Tsukayama, H. (2018, February 1, para 8) Apple Sees Record Profit, Despite
Selling Fewer iPhones. Retrieved from
https://www.washingtonpost.com/news/the-switch/wp/2018/02/01/apple-
sees-record-profit-despite-selling-fewer-iphones/?
noredirect=on&utm_term=.96bc879fc436