Intrinsic value of Apple - AAPL

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$145.82

  Intrinsic Value

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  Value-price divergence*

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$145.82

 
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*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of AAPL stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 765.4

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -7.73
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  215,639
  219,952
  225,011
  230,793
  237,286
  244,479
  252,373
  260,968
  270,271
  280,295
  291,052
  302,560
  314,839
  327,914
  341,809
  356,553
  372,179
  388,719
  406,210
  424,691
  444,205
  464,795
  486,509
  509,397
  533,512
  558,911
  585,653
  613,800
  643,420
  674,581
  707,356
Variable operating expenses, $m
 
  83,571
  85,481
  87,663
  90,114
  92,830
  95,809
  99,054
  102,566
  106,350
  110,410
  114,213
  118,848
  123,784
  129,029
  134,595
  140,493
  146,737
  153,340
  160,316
  167,682
  175,455
  183,652
  192,292
  201,395
  210,983
  221,078
  231,703
  242,884
  254,647
  267,019
Fixed operating expenses, $m
 
  77,388
  79,322
  81,305
  83,338
  85,421
  87,557
  89,746
  91,989
  94,289
  96,646
  99,063
  101,539
  104,078
  106,680
  109,347
  112,080
  114,882
  117,754
  120,698
  123,716
  126,808
  129,979
  133,228
  136,559
  139,973
  143,472
  147,059
  150,735
  154,504
  158,366
Total operating expenses, $m
  155,615
  160,959
  164,803
  168,968
  173,452
  178,251
  183,366
  188,800
  194,555
  200,639
  207,056
  213,276
  220,387
  227,862
  235,709
  243,942
  252,573
  261,619
  271,094
  281,014
  291,398
  302,263
  313,631
  325,520
  337,954
  350,956
  364,550
  378,762
  393,619
  409,151
  425,385
Operating income, $m
  60,024
  58,993
  60,208
  61,825
  63,834
  66,228
  69,006
  72,168
  75,716
  79,656
  83,995
  89,284
  94,452
  100,052
  106,100
  112,612
  119,605
  127,099
  135,116
  143,677
  152,807
  162,531
  172,878
  183,877
  195,558
  207,955
  221,103
  235,038
  249,800
  265,430
  281,971
EBITDA, $m
  70,529
  65,298
  66,645
  68,413
  70,592
  73,175
  76,160
  79,547
  83,338
  87,541
  92,162
  97,211
  102,700
  108,643
  115,055
  121,953
  129,356
  137,284
  145,758
  154,804
  164,445
  174,709
  185,625
  197,223
  209,536
  222,599
  236,447
  251,120
  266,658
  283,104
  300,503
Interest expense (income), $m
  1,316
  2,640
  2,767
  2,916
  3,087
  3,278
  3,491
  3,723
  3,977
  4,252
  4,547
  4,865
  5,205
  5,567
  5,953
  6,363
  6,798
  7,259
  7,747
  8,263
  8,809
  9,385
  9,992
  10,633
  11,308
  12,020
  12,770
  13,559
  14,389
  15,264
  16,183
Earnings before tax, $m
  61,372
  56,353
  57,441
  58,909
  60,747
  62,950
  65,516
  68,444
  71,739
  75,404
  79,447
  84,419
  89,247
  94,485
  100,147
  106,249
  112,807
  119,840
  127,369
  135,413
  143,998
  153,147
  162,886
  173,244
  184,250
  195,935
  208,334
  221,480
  235,411
  250,166
  265,787
Tax expense, $m
  15,685
  15,215
  15,509
  15,905
  16,402
  16,997
  17,689
  18,480
  19,369
  20,359
  21,451
  22,793
  24,097
  25,511
  27,040
  28,687
  30,458
  32,357
  34,390
  36,562
  38,879
  41,350
  43,979
  46,776
  49,747
  52,903
  56,250
  59,800
  63,561
  67,545
  71,763
Net income, $m
  45,687
  41,138
  41,932
  43,003
  44,345
  45,954
  47,827
  49,964
  52,369
  55,045
  57,997
  61,626
  65,150
  68,974
  73,108
  77,562
  82,349
  87,483
  92,979
  98,852
  105,118
  111,797
  118,907
  126,468
  134,502
  143,033
  152,083
  161,680
  171,850
  182,621
  194,025

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  67,155
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  321,686
  259,377
  265,343
  272,162
  279,818
  288,301
  297,609
  307,745
  318,716
  330,536
  343,221
  356,792
  371,273
  386,691
  403,076
  420,464
  438,890
  458,395
  479,021
  500,815
  523,826
  548,107
  573,713
  600,704
  629,142
  659,093
  690,629
  723,821
  758,750
  795,496
  834,147
Adjusted assets (=assets-cash), $m
  254,531
  259,377
  265,343
  272,162
  279,818
  288,301
  297,609
  307,745
  318,716
  330,536
  343,221
  356,792
  371,273
  386,691
  403,076
  420,464
  438,890
  458,395
  479,021
  500,815
  523,826
  548,107
  573,713
  600,704
  629,142
  659,093
  690,629
  723,821
  758,750
  795,496
  834,147
Revenue / Adjusted assets
  0.847
  0.848
  0.848
  0.848
  0.848
  0.848
  0.848
  0.848
  0.848
  0.848
  0.848
  0.848
  0.848
  0.848
  0.848
  0.848
  0.848
  0.848
  0.848
  0.848
  0.848
  0.848
  0.848
  0.848
  0.848
  0.848
  0.848
  0.848
  0.848
  0.848
  0.848
Average production assets, $m
  28,290
  28,814
  29,476
  30,234
  31,084
  32,027
  33,061
  34,187
  35,406
  36,719
  38,128
  39,635
  41,244
  42,957
  44,777
  46,708
  48,755
  50,922
  53,213
  55,635
  58,191
  60,888
  63,733
  66,731
  69,890
  73,217
  76,721
  80,408
  84,288
  88,370
  92,664
Working capital, $m
  27,863
  -28,374
  -29,026
  -29,772
  -30,610
  -31,538
  -32,556
  -33,665
  -34,865
  -36,158
  -37,546
  -39,030
  -40,614
  -42,301
  -44,093
  -45,995
  -48,011
  -50,145
  -52,401
  -54,785
  -57,302
  -59,959
  -62,760
  -65,712
  -68,823
  -72,100
  -75,549
  -79,180
  -83,001
  -87,021
  -91,249
Total debt, $m
  87,032
  79,050
  83,315
  88,191
  93,665
  99,730
  106,386
  113,632
  121,477
  129,928
  138,998
  148,701
  159,055
  170,079
  181,795
  194,227
  207,401
  221,347
  236,095
  251,678
  268,131
  285,491
  303,800
  323,098
  343,431
  364,847
  387,394
  411,127
  436,101
  462,375
  490,010
Total liabilities, $m
  193,437
  185,455
  189,720
  194,596
  200,070
  206,135
  212,791
  220,037
  227,882
  236,333
  245,403
  255,106
  265,460
  276,484
  288,200
  300,632
  313,806
  327,752
  342,500
  358,083
  374,536
  391,896
  410,205
  429,503
  449,836
  471,252
  493,799
  517,532
  542,506
  568,780
  596,415
Total equity, $m
  128,249
  73,922
  75,623
  77,566
  79,748
  82,166
  84,819
  87,707
  90,834
  94,203
  97,818
  101,686
  105,813
  110,207
  114,877
  119,832
  125,084
  130,642
  136,521
  142,732
  149,290
  156,210
  163,508
  171,201
  179,305
  187,842
  196,829
  206,289
  216,244
  226,716
  237,732
Total liabilities and equity, $m
  321,686
  259,377
  265,343
  272,162
  279,818
  288,301
  297,610
  307,744
  318,716
  330,536
  343,221
  356,792
  371,273
  386,691
  403,077
  420,464
  438,890
  458,394
  479,021
  500,815
  523,826
  548,106
  573,713
  600,704
  629,141
  659,094
  690,628
  723,821
  758,750
  795,496
  834,147
Debt-to-equity ratio
  0.679
  1.070
  1.100
  1.140
  1.170
  1.210
  1.250
  1.300
  1.340
  1.380
  1.420
  1.460
  1.500
  1.540
  1.580
  1.620
  1.660
  1.690
  1.730
  1.760
  1.800
  1.830
  1.860
  1.890
  1.920
  1.940
  1.970
  1.990
  2.020
  2.040
  2.060
Adjusted equity ratio
  0.272
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  45,687
  41,138
  41,932
  43,003
  44,345
  45,954
  47,827
  49,964
  52,369
  55,045
  57,997
  61,626
  65,150
  68,974
  73,108
  77,562
  82,349
  87,483
  92,979
  98,852
  105,118
  111,797
  118,907
  126,468
  134,502
  143,033
  152,083
  161,680
  171,850
  182,621
  194,025
Depreciation, amort., depletion, $m
  10,505
  6,304
  6,437
  6,588
  6,758
  6,947
  7,154
  7,379
  7,623
  7,885
  8,167
  7,927
  8,249
  8,591
  8,955
  9,342
  9,751
  10,184
  10,643
  11,127
  11,638
  12,178
  12,747
  13,346
  13,978
  14,643
  15,344
  16,082
  16,858
  17,674
  18,533
Funds from operations, $m
  66,308
  47,442
  48,369
  49,592
  51,104
  52,900
  54,980
  57,343
  59,992
  62,930
  66,164
  69,553
  73,399
  77,566
  82,063
  86,903
  92,100
  97,668
  103,622
  109,979
  116,757
  123,975
  131,653
  139,814
  148,480
  157,676
  167,428
  177,762
  188,708
  200,295
  212,558
Change in working capital, $m
  484
  -556
  -653
  -746
  -837
  -928
  -1,018
  -1,109
  -1,200
  -1,293
  -1,388
  -1,485
  -1,584
  -1,687
  -1,792
  -1,902
  -2,016
  -2,134
  -2,256
  -2,384
  -2,517
  -2,656
  -2,801
  -2,953
  -3,111
  -3,276
  -3,450
  -3,631
  -3,821
  -4,020
  -4,228
Cash from operations, $m
  65,824
  49,925
  49,021
  50,338
  51,941
  53,828
  55,998
  58,452
  61,192
  64,223
  67,551
  71,038
  74,983
  79,252
  83,855
  88,805
  94,116
  99,801
  105,878
  112,363
  119,274
  126,631
  134,454
  142,767
  151,591
  160,953
  170,877
  181,393
  192,528
  204,315
  216,786
Maintenance CAPEX, $m
  0
  -5,658
  -5,763
  -5,895
  -6,047
  -6,217
  -6,405
  -6,612
  -6,837
  -7,081
  -7,344
  -7,626
  -7,927
  -8,249
  -8,591
  -8,955
  -9,342
  -9,751
  -10,184
  -10,643
  -11,127
  -11,638
  -12,178
  -12,747
  -13,346
  -13,978
  -14,643
  -15,344
  -16,082
  -16,858
  -17,674
New CAPEX, $m
  -13,548
  -524
  -663
  -758
  -850
  -942
  -1,034
  -1,126
  -1,219
  -1,313
  -1,409
  -1,508
  -1,609
  -1,713
  -1,820
  -1,932
  -2,047
  -2,167
  -2,291
  -2,421
  -2,556
  -2,697
  -2,845
  -2,998
  -3,159
  -3,327
  -3,503
  -3,687
  -3,880
  -4,082
  -4,294
Cash from investing activities, $m
  -45,977
  -6,182
  -6,426
  -6,653
  -6,897
  -7,159
  -7,439
  -7,738
  -8,056
  -8,394
  -8,753
  -9,134
  -9,536
  -9,962
  -10,411
  -10,887
  -11,389
  -11,918
  -12,475
  -13,064
  -13,683
  -14,335
  -15,023
  -15,745
  -16,505
  -17,305
  -18,146
  -19,031
  -19,962
  -20,940
  -21,968
Free cash flow, $m
  19,847
  43,743
  42,596
  43,685
  45,044
  46,669
  48,559
  50,714
  53,136
  55,829
  58,798
  61,904
  65,448
  69,291
  73,444
  77,919
  82,727
  87,884
  93,402
  99,299
  105,591
  112,295
  119,432
  127,022
  135,086
  143,647
  152,731
  162,361
  172,567
  183,375
  194,818
Issuance/(repayment) of debt, $m
  22,057
  3,623
  4,265
  4,876
  5,474
  6,066
  6,655
  7,247
  7,845
  8,451
  9,070
  9,703
  10,354
  11,024
  11,716
  12,432
  13,175
  13,946
  14,748
  15,583
  16,453
  17,361
  18,308
  19,298
  20,333
  21,415
  22,548
  23,733
  24,974
  26,274
  27,635
Issuance/(repurchase) of shares, $m
  -29,227
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -8,333
  3,623
  4,265
  4,876
  5,474
  6,066
  6,655
  7,247
  7,845
  8,451
  9,070
  9,703
  10,354
  11,024
  11,716
  12,432
  13,175
  13,946
  14,748
  15,583
  16,453
  17,361
  18,308
  19,298
  20,333
  21,415
  22,548
  23,733
  24,974
  26,274
  27,635
Total cash flow (excl. dividends), $m
  11,514
  47,365
  46,861
  48,561
  50,518
  52,735
  55,214
  57,961
  60,980
  64,280
  67,868
  71,608
  75,801
  80,314
  85,160
  90,351
  95,902
  101,830
  108,150
  114,882
  122,044
  129,656
  137,741
  146,320
  155,419
  165,063
  175,278
  186,094
  197,540
  209,649
  222,453
Retained Cash Flow (-), $m
  -8,894
  -1,376
  -1,700
  -1,944
  -2,182
  -2,418
  -2,653
  -2,889
  -3,127
  -3,369
  -3,615
  -3,868
  -4,127
  -4,394
  -4,670
  -4,955
  -5,251
  -5,559
  -5,878
  -6,211
  -6,558
  -6,920
  -7,298
  -7,692
  -8,105
  -8,536
  -8,988
  -9,460
  -9,955
  -10,473
  -11,015
Prev. year cash balance distribution, $m
 
  55,703
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  101,692
  45,161
  46,617
  48,336
  50,317
  52,561
  55,072
  57,854
  60,912
  64,253
  67,740
  71,674
  75,920
  80,490
  85,395
  90,651
  96,271
  102,272
  108,670
  115,485
  122,736
  130,443
  138,628
  147,314
  156,527
  166,291
  176,634
  187,586
  199,176
  211,438
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  97,500
  41,344
  40,569
  39,800
  39,002
  38,146
  37,206
  36,160
  34,990
  33,685
  32,169
  30,586
  28,866
  27,022
  25,071
  23,036
  20,947
  18,834
  16,732
  14,675
  12,695
  10,823
  9,086
  7,503
  6,089
  4,852
  3,791
  2,902
  2,174
  1,592
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Apple Inc. designs, manufactures, and markets mobile communication and media devices, personal computers, and portable digital music players to consumers, small and mid-sized businesses, and education, enterprise, and government customers worldwide. The company also sells related software, services, accessories, networking solutions, and third-party digital content and applications. It offers iPhone, a line of smartphones; iPad, a line of multi-purpose tablets; and Mac, a line of desktop and portable personal computers. The company also provides iLife, a consumer-oriented digital lifestyle software application suite; iWork, an integrated productivity suite that helps users create, present, and publish documents, presentations, and spreadsheets; and other application software, such as Final Cut Pro, Logic Pro X, and FileMaker Pro. In addition, it offers Apple TV that connects to consumersÂ’ TV and enables them to access digital content directly for streaming high definition video, playing music and games, and viewing photos; Apple Watch, a personal electronic device; and iPod, a line of portable digital music and media players. Further, the company sells Apple-branded and third-party Mac-compatible, and iOS-compatible accessories, such as headphones, displays, storage devices, Beats products, and other connectivity and computing products and supplies. Additionally, it offers iCloud, a cloud service; AppleCare that offers support options for its customers; and Apple Pay, a mobile payment service. The company sells and delivers digital content and applications through the iTunes Store, App Store, Mac App Store, TV App Store, iBooks Store, and Apple Music. It also sells its products through its retail and online stores, and direct sales force, as well as through third-party cellular network carriers, wholesalers, retailers, and value-added resellers. Apple Inc. was founded in 1977 and is headquartered in Cupertino, California.

FINANCIAL RATIOS  of  Apple (AAPL)

Valuation Ratios
P/E Ratio 17
Price to Sales 3.6
Price to Book 6.1
Price to Tangible Book
Price to Cash Flow 11.8
Price to Free Cash Flow 14.9
Growth Rates
Sales Growth Rate -7.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 17.9%
Cap. Spend. - 3 Yr. Gr. Rate 8.3%
Financial Strength
Quick Ratio 6
Current Ratio 0.1
LT Debt to Equity 58.8%
Total Debt to Equity 67.9%
Interest Coverage 48
Management Effectiveness
Return On Assets 15.2%
Ret/ On Assets - 3 Yr. Avg. 18%
Return On Total Capital 22.9%
Ret/ On T. Cap. - 3 Yr. Avg. 27.6%
Return On Equity 36.9%
Return On Equity - 3 Yr. Avg. 38.9%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 39.1%
Gross Margin - 3 Yr. Avg. 39.2%
EBITDA Margin 33.9%
EBITDA Margin - 3 Yr. Avg. 34.6%
Operating Margin 27.8%
Oper. Margin - 3 Yr. Avg. 29%
Pre-Tax Margin 28.5%
Pre-Tax Margin - 3 Yr. Avg. 29.6%
Net Profit Margin 21.2%
Net Profit Margin - 3 Yr. Avg. 21.9%
Effective Tax Rate 25.6%
Eff/ Tax Rate - 3 Yr. Avg. 26%
Payout Ratio 26.6%

AAPL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AAPL stock intrinsic value calculation we used $215639 million for the last fiscal year's total revenue generated by Apple. The default revenue input number comes from 2016 income statement of Apple. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our AAPL stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for AAPL is calculated based on our internal credit rating of Apple, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Apple.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of AAPL stock the variable cost ratio is equal to 38%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $75500 million in the base year in the intrinsic value calculation for AAPL stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Apple.

Corporate tax rate of 27% is the nominal tax rate for Apple. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the AAPL stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for AAPL are equal to 13.1%.

Life of production assets of 3.2 years is the average useful life of capital assets used in Apple operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for AAPL is equal to -12.9%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $128249 million for Apple - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 5248.87 million for Apple is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Apple at the current share price and the inputted number of shares is $765.4 billion.


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Stock chart of AAPL Financial statements of AAPL Annual reports of AAPL
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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