Challenger Ltd - Hybrid Security

Apple Inc Net-Net Working Capital

The Net-Net Working Capital of Apple Inc for the quarter that ended in 2023-12-31 was $ -12.01.

In calculating the Net-Net Working Capital (NNWC), Benjamin Graham assumed that a company's accounts receivable is only worth 75% its value, its inventory is only worth 50% of its value, but its liabilities have to be paid in full. In addition, Graham believed that preferred stock belongs on the liability side of the balance sheet, not as part of capital and surplus. In "Security Analysis", preferred stock is dubbed "an imperfect creditorship position" that is best placed on the balance sheet alongside funded debt. This is a conservative way of estimating the company's value.

Calculation

For more information about NNWC, visit: Net-Net Working Capital

Quarterly Chart

Apple Inc Tangible Book Value per Share

The Tangible Book Value per Share of Apple Inc for the quarter that ended in 2023-12-31 was 4.793.

Calculation

Since intangibles such as goodwill cannot be sold when the company liquidates, tangible book value per share is considered more accurate in reflecting how much shareholders will receive when the company liquidates.

For more information about tangible book value per share, visit: Tangible Book Value per Share

Quarterly Chart

Apple Inc Intrinsic Value: Projected FCF

The Intrinsic Value: Projected FCF of Apple Inc for today is 85.29.

Since the intrinsic value calculations based on Discounted Cash Flow Intrinsic Value: DCF (FCF Based), or Discounted Earnings (DCE) Intrinsic Value: DCF (Earnings Based) cannot be applied to companies without consistent revenue and earnings, GuruFocus developed a valuation model based on normalized Free Cash Flow and Book Value of the company. The details of how we calculate the intrinsic value of stocks are described here.

This method smooths out the free cash flow over the past 6-7 years, multiplies the results by a growth multiple, and adds a portion of total equity.

Value = ((Growth Multiple)* Free Cash Flow(6 year avg) + 0.8* Total Equity(most recent))/ Shares Outstanding

In the case of negative total equity, the following formula is used (see the Total Equity section for the reason):

Value = ((Growth Multiple)* Free Cash Flow(6 year avg) + Total Equity(most recent)/0.8)/ Shares Outstanding

Calculation

Here Apple Inc' s FCF(6 year avg) is calculate as

Apple Inc Quarterly Free Cash Flow Data

Add all the Free Cash Flow together and divide 6 will get Apple Inc FCF(6 year avg) = 85,397

Apple Inc's Intrinsic Value: Projected FCF for today is calculated as

Apple Inc's Free Cash Flow Growth Multiple is 14.86.

For more information about Intrinsic Value: Projected FCF, visit: Intrinsic Value: Projected FCF

Quarterly Chart

Apple Inc Median PS Value

The Median PS Value of Apple Inc for today is 94.3

This valuation method assumes that the stock valuation will revert to its historical mean in terms of PS Ratio. The reason we use PS Ratio instead of PE Ratio or PB Ratio is because PS Ratio is independent of profit margin, and can be applied to a broader range of situations.

Calculation

For more information about median ps value, visit: Median PS Value

Quarterly Chart

Apple Inc Graham Number

The Graham Number of Apple Inc for the quarter that ended in 2023-12-31 was $ 26.31.

Graham Number is a figure that measures a stock's fundamental value by taking into account the company's earnings per share and book value per share. The Graham number is the upper bound of the price range that a defensive investor should pay for the stock. According to the theory, any stock price below the Graham number is considered undervalued, and thus worth investing in.

Calculation

For more information about graham number, visit: graham number

Quarterly Chart

Apple Inc Peter Lynch Fair Value

The Peter Lynch Fair Value of Apple Inc for the today is 117.49.

Peter Lynch Fair Value applies to growing companies. The ideal range for the growth rate is between 10 - 20% a year. Peter Lynch thinks that the fair PE Ratio for a growth company equals its growth rate, that is PEG = 1. The earnings here is trailing twelve month (TTM) earnings. The growth rate we use is the average growth rate for earnings per share over the past 5 years. If 5-Year Earnings Growth Rate is greater than 25% a year, we use 25.

Calculation

5-Year Earnings Growth Rate is 18.3. If 5-Year Earnings Growth Rate is greater than 25% a year, we use 25.

Apple Inc's EPS without NRI for the trailing twelve months (TTM) ended in 2023-12-31 was 1.52 (2023-03) + 1.26 (2023-06) + 1.46 (2023-09) + 2.18 (2023-12) = 6.42

For more information about Peter Lynch fair value, visit: Peter Lynch fair value

Quarterly Chart

Apple Inc Earnings Power Value (EPV)

The Earnings Power Value (EPV) of Apple Inc for the quarter that ended in 2023-12-31 was 53.50.

Earnings Power Value also known as just Earnings Power is a valuation technique popularised by Bruce Greenwald, an authority on value investing at Columbia University. It is arguably a better way to analyze stocks than Discounted Cash Flow analysis that relies on highly speculative growth assumptions many years into the future.

Assumption: Current profitability is sustainable.

Calculation

1. Start with "Earnings" not including accounting adjustments (one-time charges not excluded unless policy has changed). "Earnings" are "Operating earnings" (EBIT).

2. Look at average margins over a business/Industry cycle: Average Operating Margin = 27.7463%

To normalize margins and eliminate the effects on profitability of valuing the firm at different points in the business cycle, it is usually best to take a long-term average of operating margins . Ideally this would be as long as 10 years and include at least one economic downturn. However, since most of companies do not have as long as 10-year history, here GuruFocus uses the latest 5 years data to do the calculation. To smooth out unusual years but reflect recent developments, we take an average of the 5 year margin.

3. Multiply average margins by sustainable revenues and then adjust for maintenance SGA. This yields "normalized" EBIT:

To be conservative, GuruFocus uses an average of the 5 year revenue as the sustainable revenue.

EPV analysis recognises that part of SGA expenditure is made to maintain and replace the existing assets, while part is made to grow sales. Since EPV is only interested in what it costs a going concern to maintain its existing asset base, it adds back a percentage of SGA (between 15% and 50% - this is a matter of judgment and industry knowledge) to make up for the fact that some of this expenditure went to fund growth and shouldn't be accounted for. To start off, we assume 25% for the sake of prudence.

Sustainable Revenue = 342676.8Mil, Average Operating Margins = 27.7463%, Average Adjusted SGA = 5608.15, therefore "normalized" EBIT = Sustainable Revenue * Average Operating Margins + Average Adjusted SGA = 53.497650032373215* 27.7463% +5608.15= 100688.2829584.

4. Multiply by one minus Average tax rate (nopat):

Same as average operating margin calculation, GuruFocus takes an average of the 5 years tax rates. Average Tax Rate = 14.8015%, and "normalized" EBIT = 100688.2829584Mil, therefore After-tax "normalized" EBIT = "Normalized" EBIT * ( 1 - Average Tax Rate ) = 100688.2829584* ( 1 - 14.8015% ) = 85784.90675631243Mil.

5. Add back excess depreciation (after tax at 1/2 average tax rate). This yields "normalized" Earnings:

Excess depreciation = Average DDA * % of excess depreciation (after tax at 1/2 average tax rate) = 11392.6* 0.5 * 14.8015% = 843.1378445Mil.

"normalized" Earnings = After-tax "normalized" EBIT + Excess depreciation = 85784.90675631243+ 843.1378445= 86628.04460081243Mil.

Adjusted for maintenance capital expenditure:

First, calculate the revenue change regarding to the previous year. If the revenue decreased from the previous year, then the Maintenance Capital Expenditure = Capital Expenditure (positive).

Second, if the revenue increased from the previous year, then calculate the percentage of Net PPE as of corresponding Revenue.

Third, calculate Capital Expenditure (positive) - percentage of Net PPE as of corresponding Revenue * revenue increase.

If [Capital Expenditure (positive) - percentage of Net PPE as of corresponding Revenue * revenue increase] was negative, then the Maintenance Capital Expenditure = Capital Expenditure (positive).

If [Capital Expenditure (positive) - percentage of Net PPE as of corresponding Revenue * revenue increase] was positive, then the Maintenance Capital Expenditure = Capital Expenditure (positive) - percentage of Net PPE as of corresponding Revenue * revenue increase.

Fourth, GuruFocus uses an average of the 5 year maintenance capital expenditure as maintenance CAPEX. Apple Inc' s Average Maintenance CAPEX = 8485.2126 Mil.

7. Investors require a return of "WACC" for the risk they are taking: WACC = 9%

8. Apple Inc's current cash and cash equivalent = 73100Mil.

Apple Inc's current interest bearing debt = Long-Term Debt + Short-Term Debt = 95088 + 12952 = 108040 Mil.

Apple Inc's current diluted shares outstanding = 15576.641Mil.

Apple Inc's Earnings Power Value (EPV) for the quarter ended in 2023-12-31 was calculated as:

For more information about EPV, visit: Earnings Power Value (EPV)

Quarterly Chart