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Apple Inc  (NAS:AAPL) Owner Earnings per Share (TTM): 9.5 (As of Sep. 2017)

In 1986 Berkshire Hathaway Shareholder Letter, Warren Buffett defined owner earnings as follows:

"These represent (a) reported earnings plus (b) depreciation, depletion, amortization, and certain other non-cash charges...less (c) the average annual amount of capitalized expenditures for plant and equipment, etc. that the business requires to fully maintain its long-term competitive position and its unit volume (If the business requires additional working capital to maintain its competitive position and unit volume, the increment also should be included in (c))...Our owner-earnings equation does not yield the deceptively precise figures provided by GAAP, since (c) must be a guess - and one sometimes very difficult to make. Despite this problem, we consider the owner earnings figure, not the GAAP figure, to be the relevant item for valuation purposes - both for investors in buying stocks and for managers in buying entire businesses...All of this points up the absurdity of the 'cash flow' numbers that are often set forth in Wall Street reports. These numbers routinely include (a) plus (b) - but do not subtract (c)."

Apple Inc's owner earnings per share for the trailing twelve months (TTM) ended in Sep. 2017 was $9.5. It's Price-to-Owner-Earnings ratio for today is 18.41.


NAS:AAPL' s Price-to-Owner-Earnings Range Over the Past 10 Years
Min: 7.52   Max: 34.72
Current: 18.41

7.52
34.72

During the past 13 years, the highest Price-to-Owner-Earnings ratio of Apple Inc was 34.72. The lowest was 7.52. And the median was 12.06.


NAS:AAPL's Price-to-Owner-Earnings is ranked higher than
59% of the 1089 Companies
in the Global industry.

( Industry Median: 20.80 vs. NAS:AAPL: 18.41 )

Apple Inc's Earnings per Share (Diluted) for the three months ended in Sep. 2017 was $2.07. Its Earnings per Share (Diluted) for the trailing twelve months (TTM) ended in Sep. 2017 was $9.20. It's PE Ratio ratio for today is 19.02.

Apple Inc's EPS without NRI for the three months ended in Sep. 2017 was $2.07. Its EPS without NRI for the trailing twelve months (TTM) ended in Sep. 2017 was $9.20. It's PE Ratio without NRI ratio for today is 19.02.


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

* Premium members only.

Apple Inc Annual Data

Sep08 Sep09 Sep10 Sep11 Sep12 Sep13 Sep14 Sep15 Sep16 Sep17
Owner Earnings per Share (TTM) Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only 7.31 8.48 12.17 9.67 9.50

Apple Inc Quarterly Data

Dec12 Mar13 Jun13 Sep13 Dec13 Mar14 Jun14 Sep14 Dec14 Mar15 Jun15 Sep15 Dec15 Mar16 Jun16 Sep16 Dec16 Mar17 Jun17 Sep17
Owner Earnings per Share (TTM) Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only 9.67 9.64 9.87 9.49 9.50

Competitive Comparison
* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap.


Calculation

In 1986 Berkshire Hathaway Shareholder Letter, Warren Buffett defined owner earnings as follows:

"These represent (a) reported earnings plus (b) depreciation, depletion, amortization, and certain other non-cash charges...less (c) the average annual amount of capitalized expenditures for plant and equipment, etc. that the business requires to fully maintain its long-term competitive position and its unit volume. (If the business requires additional working capital to maintain its competitive position and unit volume, the increment also should be included in (c))...Our owner-earnings equation does not yield the deceptively precise figures provided by GAAP, since (c) must be a guess - and one sometimes very difficult to make. Despite this problem, we consider the owner earnings figure, not the GAAP figure, to be the relevant item for valuation purposes - both for investors in buying stocks and for managers in buying entire businesses...All of this points up the absurdity of the 'cash flow' numbers that are often set forth in Wall Street reports. These numbers routinely include (a) plus (b) - but do not subtract (c)."

To make it simple, then you will have:

Owner Earning Per Share = (Net Income + Depreciation, Depletion and Amortization + Change In Deferred Tax - 5Y Average of Maintenance Capital Expenditure + Change In Working Capital) / Shares Outstanding (Diluted Average)

Apple Inc's "Owner Earnings Per Share (TTM)" Calculation:

TTM / Last Quarter Average of Last 20 Quarters
Net Income }
Depreciation, Depletion and Amortization }
Change In Deferred Tax }
5Y Average of Maintenance Capital Expenditure }
Change In Working Capital }
Shares Outstanding (Diluted Average) }

1. Start with "Net Income" from income statement. Apple Inc's Net Income for the trailing twelve months (TTM) ended in Sep. 2017 was $48,351 Mil.

2. "Depreciation, Depletion and Amortization" is from cashflow statement. Apple Inc's Depreciation, Depletion and Amortization for the trailing twelve months (TTM) ended in Sep. 2017 was $10,157 Mil. This needs to be added back because company does not actually need to pay cash for it. It is a non-cash item.

3. Other non-cash charges usually include "Stock Based Compensation" and "Change In Deferred Tax":
However, to be conservative, GuruFocus will not add Stock Based Compensation back to net income. Apple Inc's Change In Deferred Tax for the trailing twelve months (TTM) ended in Sep. 2017 was $5,966 Mil.

4. Average maintenance capital expenditure over a business/industry cycle: 5-Year Average Maintenance Capital Expenditure = $9,668 Mil

It is usually best to take a long-term average of maintenance capital expenditure. Ideally this would be as long as 10 years and include at least one economic downturn. However, since many 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 maintenance capital expenditure.

The following shows how to get 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.
Growth Capital Expenditure = Percentage of Property, Plant and Equipment as of corresponding Revenue * Revenue Increase
Third, calculate Capital Expenditure (positive) - Growth Capital Expenditure.
If [Capital Expenditure (positive) - Growth Capital Expenditure] was negative, then the Maintenance Capital Expenditure = Capital Expenditure (positive).
If [Capital Expenditure (positive) - Growth Capital Expenditure] was positive, then the Maintenance Capital Expenditure = Capital Expenditure (positive) - Growth Capital Expenditure.
Fourth, get the average of the 5 years maintenance capital expenditure.

Apple Inc's 5-Year Average Maintenance Capital Expenditure = $9,668 Mil

5. "Change In Working Capital" is from cashflow statement. Apple Inc's Change In Working Capital for the trailing twelve months (TTM) ended in Sep. 2017 was $-5,550 Mil.
Note: GuruFocus' Change in Working Capital is provided by Morningstar. It is calculated by adding the items under "Change in operating assets and liabilities" (may refer to a different name for different company) section in Cash Flow Statement from original financial report. And sometimes it includes non-current parts of assets and liabilities.

6. Apple Inc's Shares Outstanding (Diluted Average) for the months ended in Sep. 2017 was 5183.586 Mil.

Apple Inc's Onwer Earnings Per Share for Sep. 2017 is calculated as:

Owner Earnings Per Share(TTM)
=( Net Income+Depreciation, Depletion and Amortization+Change In Deferred Tax
=( 48351 +10157+5966
-5Y Avg of Maintenance CAPEX+Change In Working Capital )/Shares Outstanding (Diluted Average)
-9667.87353059+-5550)/5183.586
=9.5

Price-to-Owner-Earnings=Current Price/Owner Earnings Per Share (TTM)
=174.96/9.5
=18.41

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.


Be Aware

Assumption: Companies usually do not report maintenance capital expenditures and growth capital expenditures separately. Here we use estimated numbers and average them over 5 years. The method to estimate maintenance capital expenditures can be found in above part 4.

Note: GuruFocus' Change In Working Capital is provided by Morningstar. It is calculated by adding the items under "Change in operating assets and liabilities" (may refer to a different name for different company) section in Cash Flow Statement from original financial report. And it includes non-current parts of assets and liabilities.


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