Week 4 Assignment – Investment Selection

Diana Jauregui

FIN 320

Professor Stephen Bartorillo

November 16, 2023

Apple has a relatively low P/E ratio compared to the industry average, indicating that the stock
may be undervalued. This can provide potential upside when the market recognizes the company's
earnings potential. As of November 2023, Apple’s P/E ratio is 29.5. Compared to similar companies or
competitors like Amazon, Amazons P/E ratio is 72.8 as of November 2023 (unknown,1). Apple's P/CFO
ratio is also attractive, suggesting that the company generates strong cash flows from its operations and
can invest in new growth opportunities or return capital to shareholders. From 2009 to 2015 Apple
annual cash flow increased then it declined 18.50% in 2016 but then increased 20.57% in 2018 from
2017 then declined 10.39% 2019 then increased year-over-year then declined a 9.5% in 2023 from 2022
(unknown,2). Apple's stock has been in a sustained uptrend for the past few years, demonstrating a
favorable technical indicator. This consistency in upward price movement suggests that the market is
optimistic about the company's prospects.

Investing in Apple's stock carries systematic risk. Apple has publicly documented 28 potential
risks or uncertainties that may impact its business operations, 6 risks in legal and regulatory (regulation,
environmental/social, litigation and legal liabilities, and taxation and government incentives), 6 risks in
ability to sell l(sales and marketing, competition, and brand/reputation), 5 risks in production (supply
chain, manufacturing, employment/personnel, and costs), 4 risks (share price and shareholder rights,
accounting and financial operations, debt and financing, and corporate activity and growth), 4 risks
(economy and political environment, capital markets, and 3 risks (technology and trade secrets),
(unknown,3). Apple’s performance is closely tied to the overall health of the global economy. During an
economic downturn, consumers may reduce their spending on Apple’s products, affecting the company’s
revenues and profitability. The technology industry is highly competitive, and Apple faces competition
from other tech giants like Samsung, Microsoft, and Google. Changes in market dynamics or competitive
pressures can affect Apple’s market share, sales, and profitability, thereby influencing its systematic risk.
Changes in regulations or legal developments can impact Apple’s business operations. Apple operates in
many countries worldwide, and events such as geopolitical tensions, trade wars, or political instability in
key markets can disrupt supply chains, impact consumer sentiment, and lead to currency exchange rate
fluctuations, all of which can influence the company’s systematic risk. However, Apple also offers the
potential for attractive returns. The company has a strong brand, loyal customer base, and a track record
of innovation. Additionally, Apple's growing product ecosystem, including hardware, software, and
services, provides a diversified revenue stream. This diversification can help mitigate risks and contribute
to potential long-term returns.
 Sources

1. Companies market cap. 2023. P/E ratio for Apple (AAPL) .

https://companiesmarketcap.com/apple/pe-ratio/#

2. Macro trends LLC. 2023. Apple Cash Flow from Operating Activities 2010-2013| AAPL.
https://www.macrotrends.net/stocks/charts/AAPL/apple/cash-flow-from-operating-activities

3. Apple (AAPL) Risk Factors. 2023. https://www.tipranks.com/stocks/aapl/risk-factor