Is Apple (AAPL) Fairly Valued? An In-Depth Valuation Analysis

Unraveling the intrinsic value of Apple Inc (AAPL) using GuruFocus's proprietary valuation model

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Apple Inc (AAPL, Financial) experienced a daily loss of -2.17%, with a 3-month gain of 2.92%. The company's Earnings Per Share (EPS) stands at 5.95. The question we aim to answer is: Is Apple (AAPL) fairly valued? This article provides a comprehensive valuation analysis, offering valuable insights into the company's financial performance and intrinsic value.

Introduction to Apple Inc (AAPL, Financial)

Apple Inc (AAPL) designs an array of consumer electronic devices, including the iPhone, iPad, Mac, Apple Watch, and AirPods. The company also offers services like Apple Music, iCloud, Apple Care, Apple TV+, Apple Arcade, Apple Fitness, Apple Card, and Apple Pay. Known for its integration of hardware, software, semiconductors, and services, Apple distributes its products online, through company-owned stores, and third-party retailers. The company's stock price is currently at $178.04, while the GF Value, an estimate of fair value, stands at $172.77.


Understanding GF Value

The GF Value is a unique measure of a stock's intrinsic value, derived from historical multiples, an internal adjustment based on the company's past returns and growth, and future business performance estimates. The GF Value Line provides an overview of the fair value at which the stock should ideally trade. If the stock price is significantly above the GF Value Line, it is overvalued, and its future returns are likely to be poor. Conversely, if the stock price is significantly below the GF Value Line, the stock may be undervalued and poised for higher future returns.

According to GuruFocus's valuation method, Apple (AAPL, Financial) is fairly valued. The stock's current price of $178.04 per share aligns closely with its GF Value. As a result, the long-term return of Apple's stock is likely to be close to the rate of its business growth.


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Assessing Apple's Financial Strength

Investing in companies with low financial strength could result in permanent capital loss. Therefore, scrutinizing a company's financial strength is essential before deciding to buy shares. Apple's cash-to-debt ratio is 0.57, ranking worse than 69.86% of companies in the Hardware industry. Based on this, GuruFocus ranks Apple's financial strength as 7 out of 10, indicating a fair balance sheet.


Profitability and Growth of Apple

Consistent profitability over the long term reduces risk for investors. Higher profit margins often indicate a better investment compared to a company with lower profit margins. Apple has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $383.90 billion and Earnings Per Share (EPS) of $5.95. Its operating margin is 29.23%, which ranks better than 97.77% of companies in the Hardware industry. Overall, the profitability of Apple is ranked 10 out of 10, indicating strong profitability.

Growth is a crucial factor in the valuation of a company. GuruFocus research suggests that growth is closely correlated with the long-term performance of a company's stock. If a company's business is growing, it usually creates value for its shareholders, especially if the growth is profitable. Conversely, if a company's revenue and earnings are declining, the value of the company will decrease. Apple's 3-year average revenue growth rate is better than 86.03% of companies in the Hardware industry. Apple's 3-year average EBITDA growth rate is 22.8%, which ranks better than 69.61% of companies in the Hardware industry.


Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. Ideally, the return on invested capital should be higher than the weighted cost of capital. For the past 12 months, Apple's return on invested capital is 31.88, and its cost of capital is 11.57.


Concluding Remarks

In conclusion, the stock of Apple (AAPL, Financial) is believed to be fairly valued. The company's financial condition is fair, and its profitability is strong. Its growth ranks better than 69.61% of companies in the Hardware industry. To learn more about Apple stock, you can check out its 30-Year Financials here.

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I/we have no positions in any stocks mentioned, and have no plans to buy any new positions in the stocks mentioned within the next 72 hours. Click for the complete disclosure