Unveiling Apple (AAPL)'s Value: Is It Really Priced Right? A Comprehensive Guide

Deep-diving into Apple's intrinsic value, financial strength, profitability, and growth

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Apple Inc (AAPL, Financial) experienced a daily loss of -1.59%, bringing its 3-month gain to 5.78%. With an Earnings Per Share (EPS) (EPS) of 5.95, the question arises: Is the stock fairly valued? This article embarks on a comprehensive valuation analysis of Apple, providing insights into its financial strength, profitability, and growth. So, let's dive in.

A Brief Overview of Apple Inc

Apple Inc (AAPL, Financial) is a globally recognized company known for designing a wide variety of consumer electronic devices, including the iPhone, iPad, Mac, Apple Watch, and AirPods. Alongside hardware, Apple offers a variety of services such as Apple Music, iCloud, Apple Care, Apple TV+, Apple Arcade, and more. The company's products are distributed online, through company-owned stores, and third-party retailers.

At present, Apple's stock price is $186.68, which is slightly higher than its Fair Value (GF Value) of $175.92. This comparison between the stock price and GF Value sets the stage for a deeper exploration of Apple's value.


Understanding GF Value

The GF Value represents the current intrinsic value of a stock derived from our exclusive method. It is calculated based on historical multiples (PE Ratio, PS Ratio, PB Ratio, and Price-to-Free-Cash-Flow) that the stock has traded at, a GuruFocus adjustment factor based on the company's past returns and growth, and future estimates of the business performance. If the stock price is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher.

For Apple, the GF Value indicates that the stock is fairly valued. Given its current price of $ 186.68 per share, Apple's stock aligns closely with its GF Value. This suggests that the long-term return of its stock is likely to be close to the rate of its business growth.


Assessing Apple's Financial Strength

Investing in companies with poor financial strength can lead to a higher risk of permanent loss of capital. Thus, it is crucial to review the financial strength of a company before deciding to buy its stock. Factors like the cash-to-debt ratio and interest coverage can provide insights into a company's financial strength. For Apple, the cash-to-debt ratio is 0.57, which is lower than 69.9% of companies in the Hardware industry. Nonetheless, GuruFocus ranks the overall financial strength of Apple at 7 out of 10, indicating fair financial strength.


Apple's Profitability and Growth

Companies that have been consistently profitable offer less risk for investors. Higher profit margins usually indicate a better investment compared to a company with lower profit margins. Apple has been profitable for 10 of the past 10 years. Over the past twelve months, the company had a revenue of $383.90 billion and an EPS of $5.95. Its operating margin is 29.23%, which ranks better than 97.85% of companies in the Hardware industry. Overall, the profitability of Apple is ranked 10 out of 10, indicating strong profitability.

Growth is one of the most critical factors in the valuation of a company. Companies that grow faster create more value for shareholders, especially if that growth is profitable. The average annual revenue growth of Apple is 20%, which ranks better than 85.97% of companies in the Hardware industry. The 3-year average EBITDA growth is 22.8%, which ranks better than 69.38% of companies in the Hardware industry.


Another way to assess the profitability of a company is to compare its return on invested capital (ROIC) and the weighted cost of capital (WACC). ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. For the past 12 months, Apple's ROIC is 31.88, and its WACC is 11.37, indicating a healthy return on invested capital.



In conclusion, Apple (AAPL, Financial) appears to be fairly valued. The company's financial condition is fair, its profitability is strong, and its growth ranks better than 69.38% of companies in the Hardware industry. To learn more about Apple stock, you can check out its 30-Year Financials here.

To find out the high-quality companies that may deliver above-average returns, please check out the GuruFocus High Quality Low Capex Screener.


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