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Category: Apple (APPL)
Date: 25 August 2020 Stock price of Apple (APPL): $503.43 As the title states. The stock of Apple (APPL) stock is significantly overvalued, so why would you buy the stock at this price? Surely its a bubble waiting to burst, and it will leave a lot of investors burnt. Sometimes the hardest thing to do is not follow the herd. But when you look at the numbers one has to ask if its money well spent if you looking to buy into Apple (APPL) stock now.
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So Apple is trading at 30 times its stockholders equity per share. What is the stockholders equity per share. Well essentially of Apple were to sell all their assets, pay all their debts and liabilities and distribute the rest evenly amongst its shareholders, each shareholder will get $16.60 a stock. "
More About Apple Inc (APPL)
Apple is one of the worlds biggest smart phone and related accessories makers with the group manufacturing the iPhone, iPad, Macbook (laptops for those that don't know), Apple Watch and other related products and services. The group is starting to focus more and more on their services offering such as cloud services for their device users and services such as iTunes.
Apple sales by product type and category for the 3rd quarter of 2020:
The size of Apple (APPL) various markets based on its sales in 2019 comes to the following:
Overview of Apple's latest earnings report
Our latest stock valuation of Apple (APPL): $247.90
Apple sales by product type and category for the 3rd quarter of 2020:
- iPhone $26.418 billon (up 1.6% from $25.986 billion for the same quarter of the previous year)
- Mac: $7.079 billion (up 21.6% from $5.820 billion for the same quarter of the previous year)
- iPad: $6.582 billion (up 31% from $5.023 billion for the same quarter of the previous year)
- Wearables, Home and Accessories: $6.450 billion (up 16.7% from $5.525 billion for the same quarter of the previous year)
- Services: $13.156 billion (up 14.8% from $11.455 billion for the same quarter of the previous year)
The size of Apple (APPL) various markets based on its sales in 2019 comes to the following:
- Americas 44.9%
- Europe 23.17%
- Greater China 16.78%
- Japan: 8.26%
- Rest of Asia Pacific 6.84%
Overview of Apple's latest earnings report
- Sales of Products $46.529 billion (down from $42.354 billion for the same quarter of the previous year)
- Sales of Products increased by 9.8% over the last 12 months
- Sales of Services $13.156 billion (up from $11.455 billion for the same quarter of the previous year)
- Sales of Services increased by 14.8% over the last 12 months
- Total cost of sales: $37.005 billion (up from $33.582 billion for the same quarter of the previous year)
- Total cost of sales increased by 10.2% over the last 12 months
- Margins remained pretty constant as sales and cost of sales grew at very similar rates
- Operating income: $13.091 (up from $11.544 billion for the same quarter of the previous year)
- Net income $11.253 billion (up from $10.044 billion for the same quarter of the previous year)
- Diluted earnings per share: $2.58 (up from $2.18 for the same quarter of the previous year)
- PE ratio of Apple: 49.2
- Dividend declared: $0.82
- Dividend yield: 0.65%
- Number of shares in issue: 4.354 billion (down from 4.601 billion for the same period of the previous year)
- Cash and cash equivalents: $33.383 billion
- Cash and cash equivalents per share: $7.67
- Cash and cash equivalents makes up 1.9% of Apple's market capital
- Cash and cash equivalents makes up 10.5% of Apple's total assets
- Cash and cash equivalents per share: $7.67
- Accounts receivable, net: $17.883 billion
- Accounts receivable makes up 5.6% of Apple's total assets
- Inventories: $3.978 billion
- Inventories makes up 1.25% of Apple's total assets
- Total stockholders equity in Apple: $72.282 billion
- Stockholders equity per share in Apple: $16.60
- Apple is trading at 30.3 times its stockholders equity per share which is well outside the expected range of between 2 and 4 times that most firms tend to trade at. This ratio should raise alarm bells for investors and does point to how inflated APPL's stock price is.
- For some perspective the average price to book value of firms in the S&P 500 is 3.7.
- Stockholders equity per share in Apple: $16.60
- Cash generated from operations (for the 3 quarters of fiscal 2020): $60.098 billion
- Cash generated from operations per share (for the 3 quarters of fiscal 2020): $13.80
Our latest stock valuation of Apple (APPL): $247.90
Apple (APPL) stock price performance over the last 5 years
The image below shows the stock price performance of Apple (APPL) over the last 5 years. And as the image shows its been a VERY good time for stockholders with the stock of Apple increasing by a whopping 337% over the last 5 years.
So why do we believe the stock of Apple (APPL) is overvalued?
Lets take a look at few fundamental metrics which points to reasons why we believe the stock of Apple (APPL) is overvalued.
PE ratio
PE ratio of Apple (APPL) is sitting at 49.2. So for for every $49 dollars you pay per Apple share, they make $1 profit. So a relatively low yield of around 2% on your investment. And that's just the profit they make, they don't pay out all profits in dividend so essentially you get even less out. Put differently if Apple (APPL) were to make the same profits into infinity it would take the group 49.2 years to make in profits what you are currently paying for the stock.
Stockholders equity per share
The stockholders equity per share for Apple is sitting at $16.60. So Apple is trading at 30 times its stockholders equity per share. What is the stockholders equity per share. Well essentially of Apple were to sell all their assets, pay all their debts and liabilities and distribute the rest evenly amongst its shareholders, each shareholder will get $16.60 a stock. So why would one pay $503.43 a stock when most one would get back if they were to go under, or dissolve etc is $16.60. As mentioned earlier the average price to book value ratio of firms in the S&P 500 is 3.7 times. So Apple (APPL) is trading at 8 times the stockholders equity per share that most firms in the S&P 500 is trading at.
Low Dividend Yield
Apple is currently paying a quarterly dividend of $0.82, which equates to an annual dividend yield of 0.65% based on its current stock price. Hardly shooting the lights out considering the S&P 500's dividend yield is over 2%
PE ratio
PE ratio of Apple (APPL) is sitting at 49.2. So for for every $49 dollars you pay per Apple share, they make $1 profit. So a relatively low yield of around 2% on your investment. And that's just the profit they make, they don't pay out all profits in dividend so essentially you get even less out. Put differently if Apple (APPL) were to make the same profits into infinity it would take the group 49.2 years to make in profits what you are currently paying for the stock.
Stockholders equity per share
The stockholders equity per share for Apple is sitting at $16.60. So Apple is trading at 30 times its stockholders equity per share. What is the stockholders equity per share. Well essentially of Apple were to sell all their assets, pay all their debts and liabilities and distribute the rest evenly amongst its shareholders, each shareholder will get $16.60 a stock. So why would one pay $503.43 a stock when most one would get back if they were to go under, or dissolve etc is $16.60. As mentioned earlier the average price to book value ratio of firms in the S&P 500 is 3.7 times. So Apple (APPL) is trading at 8 times the stockholders equity per share that most firms in the S&P 500 is trading at.
Low Dividend Yield
Apple is currently paying a quarterly dividend of $0.82, which equates to an annual dividend yield of 0.65% based on its current stock price. Hardly shooting the lights out considering the S&P 500's dividend yield is over 2%