Intrinsic value of Apple - AAPL

Previous Close

$217.58

  Intrinsic Value

$163.88

stock screener

  Rating & Target

sell

-25%

Previous close

$217.58

 
Intrinsic value

$163.88

 
Up/down potential

-25%

 
Rating

sell

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 2017), $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 1,135.1

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  6.30
  6.17
  6.05
  5.95
  5.85
  5.77
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.37
  5.33
  5.30
  5.27
  5.24
  5.22
  5.20
  5.18
  5.16
  5.14
  5.13
  5.12
  5.10
  5.09
  5.08
  5.08
  5.07
  5.06
Revenue, $m
  243,676
  258,711
  274,370
  290,689
  307,703
  325,450
  343,971
  363,308
  383,507
  404,614
  426,678
  449,753
  473,892
  499,152
  525,595
  553,281
  582,278
  612,654
  644,482
  677,838
  712,801
  749,455
  787,888
  828,190
  870,458
  914,793
  961,301
  1,010,093
  1,061,285
  1,114,999
Variable operating expenses, $m
  175,883
  186,686
  197,938
  209,663
  221,887
  234,638
  247,946
  261,840
  276,352
  291,518
  306,570
  323,149
  340,493
  358,643
  377,642
  397,534
  418,369
  440,194
  463,063
  487,029
  512,150
  538,486
  566,100
  595,057
  625,427
  657,282
  690,699
  725,756
  762,537
  801,131
Fixed operating expenses, $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
Total operating expenses, $m
  175,883
  186,686
  197,938
  209,663
  221,887
  234,638
  247,946
  261,840
  276,352
  291,518
  306,570
  323,149
  340,493
  358,643
  377,642
  397,534
  418,369
  440,194
  463,063
  487,029
  512,150
  538,486
  566,100
  595,057
  625,427
  657,282
  690,699
  725,756
  762,537
  801,131
Operating income, $m
  67,792
  72,025
  76,433
  81,026
  85,816
  90,812
  96,025
  101,468
  107,154
  113,096
  120,108
  126,604
  133,399
  140,510
  147,953
  155,747
  163,909
  172,460
  181,419
  190,809
  200,651
  210,969
  221,788
  233,132
  245,031
  257,511
  270,603
  284,338
  298,748
  313,868
EBITDA, $m
  72,712
  77,198
  81,871
  86,741
  91,817
  97,113
  102,640
  108,410
  114,437
  120,735
  127,319
  134,205
  141,408
  148,945
  156,836
  165,097
  173,750
  182,814
  192,311
  202,265
  212,697
  223,635
  235,103
  247,129
  259,742
  272,971
  286,849
  301,408
  316,684
  332,712
Interest expense (income), $m
  2,092
  6,247
  7,066
  7,920
  8,810
  9,737
  10,704
  11,713
  12,765
  13,864
  15,012
  16,211
  17,465
  18,777
  20,148
  21,584
  23,087
  24,660
  26,308
  28,034
  29,843
  31,738
  33,725
  35,808
  37,992
  40,283
  42,685
  45,204
  47,847
  50,620
  53,529
Earnings before tax, $m
  61,546
  64,959
  68,513
  72,216
  76,078
  80,107
  84,312
  88,703
  93,290
  98,084
  103,897
  109,138
  114,622
  120,361
  126,369
  132,660
  139,249
  146,152
  153,385
  160,966
  168,913
  177,244
  185,979
  195,140
  204,748
  214,827
  225,399
  236,491
  248,128
  260,339
Tax expense, $m
  16,617
  17,539
  18,498
  19,498
  20,541
  21,629
  22,764
  23,950
  25,188
  26,483
  28,052
  29,467
  30,948
  32,498
  34,120
  35,818
  37,597
  39,461
  41,414
  43,461
  45,606
  47,856
  50,214
  52,688
  55,282
  58,003
  60,858
  63,852
  66,995
  70,292
Net income, $m
  44,928
  47,420
  50,014
  52,718
  55,537
  58,478
  61,548
  64,753
  68,102
  71,601
  75,845
  79,671
  83,674
  87,864
  92,249
  96,842
  101,652
  106,691
  111,971
  117,505
  123,306
  129,388
  135,765
  142,452
  149,466
  156,823
  164,541
  172,638
  181,134
  190,048

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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
Total assets, $m
  398,815
  423,421
  449,051
  475,759
  503,605
  532,651
  562,964
  594,613
  627,671
  662,215
  698,328
  736,093
  775,600
  816,943
  860,220
  905,534
  952,992
  1,002,707
  1,054,799
  1,109,392
  1,166,615
  1,226,605
  1,289,505
  1,355,466
  1,424,645
  1,497,207
  1,573,325
  1,653,180
  1,736,964
  1,824,876
Adjusted assets (=assets-cash), $m
  398,815
  423,421
  449,051
  475,759
  503,605
  532,651
  562,964
  594,613
  627,671
  662,215
  698,328
  736,093
  775,600
  816,943
  860,220
  905,534
  952,992
  1,002,707
  1,054,799
  1,109,392
  1,166,615
  1,226,605
  1,289,505
  1,355,466
  1,424,645
  1,497,207
  1,573,325
  1,653,180
  1,736,964
  1,824,876
Revenue / Adjusted assets
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611
  0.611
Average production assets, $m
  41,181
  43,722
  46,369
  49,126
  52,002
  55,001
  58,131
  61,399
  64,813
  68,380
  72,109
  76,008
  80,088
  84,357
  88,825
  93,504
  98,405
  103,539
  108,918
  114,555
  120,463
  126,658
  133,153
  139,964
  147,107
  154,600
  162,460
  170,706
  179,357
  188,435
Working capital, $m
  -47,029
  -49,931
  -52,953
  -56,103
  -59,387
  -62,812
  -66,386
  -70,118
  -74,017
  -78,090
  -82,349
  -86,802
  -91,461
  -96,336
  -101,440
  -106,783
  -112,380
  -118,242
  -124,385
  -130,823
  -137,571
  -144,645
  -152,062
  -159,841
  -167,998
  -176,555
  -185,531
  -194,948
  -204,828
  -215,195
Total debt, $m
  130,846
  146,668
  163,148
  180,321
  198,226
  216,903
  236,394
  256,744
  278,000
  300,213
  323,433
  347,716
  373,119
  399,703
  427,530
  456,666
  487,182
  519,149
  552,644
  587,747
  624,541
  663,115
  703,560
  745,973
  790,455
  837,112
  886,056
  937,403
  991,276
  1,047,803
Total liabilities, $m
  256,438
  272,260
  288,740
  305,913
  323,818
  342,495
  361,986
  382,336
  403,592
  425,805
  449,025
  473,308
  498,711
  525,295
  553,122
  582,258
  612,774
  644,741
  678,236
  713,339
  750,133
  788,707
  829,152
  871,565
  916,047
  962,704
  1,011,648
  1,062,995
  1,116,868
  1,173,395
Total equity, $m
  142,377
  151,161
  160,311
  169,846
  179,787
  190,157
  200,978
  212,277
  224,078
  236,411
  249,303
  262,785
  276,889
  291,649
  307,099
  323,275
  340,218
  357,967
  376,563
  396,053
  416,481
  437,898
  460,353
  483,901
  508,598
  534,503
  561,677
  590,185
  620,096
  651,481
Total liabilities and equity, $m
  398,815
  423,421
  449,051
  475,759
  503,605
  532,652
  562,964
  594,613
  627,670
  662,216
  698,328
  736,093
  775,600
  816,944
  860,221
  905,533
  952,992
  1,002,708
  1,054,799
  1,109,392
  1,166,614
  1,226,605
  1,289,505
  1,355,466
  1,424,645
  1,497,207
  1,573,325
  1,653,180
  1,736,964
  1,824,876
Debt-to-equity ratio
  0.920
  0.970
  1.020
  1.060
  1.100
  1.140
  1.180
  1.210
  1.240
  1.270
  1.300
  1.320
  1.350
  1.370
  1.390
  1.410
  1.430
  1.450
  1.470
  1.480
  1.500
  1.510
  1.530
  1.540
  1.550
  1.570
  1.580
  1.590
  1.600
  1.610
Adjusted equity ratio
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  44,928
  47,420
  50,014
  52,718
  55,537
  58,478
  61,548
  64,753
  68,102
  71,601
  75,845
  79,671
  83,674
  87,864
  92,249
  96,842
  101,652
  106,691
  111,971
  117,505
  123,306
  129,388
  135,765
  142,452
  149,466
  156,823
  164,541
  172,638
  181,134
  190,048
Depreciation, amort., depletion, $m
  4,920
  5,174
  5,438
  5,714
  6,002
  6,302
  6,615
  6,941
  7,283
  7,639
  7,211
  7,601
  8,009
  8,436
  8,883
  9,350
  9,840
  10,354
  10,892
  11,455
  12,046
  12,666
  13,315
  13,996
  14,711
  15,460
  16,246
  17,071
  17,936
  18,843
Funds from operations, $m
  49,848
  52,594
  55,453
  58,432
  61,539
  64,780
  68,163
  71,695
  75,385
  79,241
  83,056
  87,272
  91,683
  96,299
  101,132
  106,192
  111,492
  117,045
  122,863
  128,961
  135,353
  142,054
  149,080
  156,449
  164,177
  172,283
  180,787
  189,709
  199,069
  208,891
Change in working capital, $m
  -2,787
  -2,902
  -3,022
  -3,150
  -3,284
  -3,425
  -3,575
  -3,732
  -3,898
  -4,074
  -4,258
  -4,453
  -4,659
  -4,875
  -5,103
  -5,343
  -5,596
  -5,863
  -6,143
  -6,438
  -6,748
  -7,074
  -7,417
  -7,778
  -8,158
  -8,557
  -8,976
  -9,417
  -9,880
  -10,367
Cash from operations, $m
  52,635
  55,495
  58,475
  61,582
  64,823
  68,205
  71,737
  75,427
  79,283
  83,314
  87,314
  91,725
  96,342
  101,175
  106,235
  111,536
  117,089
  122,908
  129,006
  135,399
  142,101
  149,128
  156,498
  164,227
  172,335
  180,840
  189,763
  199,126
  208,949
  219,258
Maintenance CAPEX, $m
  -3,871
  -4,118
  -4,372
  -4,637
  -4,913
  -5,200
  -5,500
  -5,813
  -6,140
  -6,481
  -6,838
  -7,211
  -7,601
  -8,009
  -8,436
  -8,883
  -9,350
  -9,840
  -10,354
  -10,892
  -11,455
  -12,046
  -12,666
  -13,315
  -13,996
  -14,711
  -15,460
  -16,246
  -17,071
  -17,936
New CAPEX, $m
  -2,467
  -2,541
  -2,646
  -2,758
  -2,875
  -2,999
  -3,130
  -3,268
  -3,414
  -3,567
  -3,729
  -3,900
  -4,079
  -4,269
  -4,469
  -4,679
  -4,900
  -5,134
  -5,379
  -5,637
  -5,909
  -6,195
  -6,495
  -6,811
  -7,143
  -7,493
  -7,860
  -8,246
  -8,651
  -9,078
Cash from investing activities, $m
  -6,338
  -6,659
  -7,018
  -7,395
  -7,788
  -8,199
  -8,630
  -9,081
  -9,554
  -10,048
  -10,567
  -11,111
  -11,680
  -12,278
  -12,905
  -13,562
  -14,250
  -14,974
  -15,733
  -16,529
  -17,364
  -18,241
  -19,161
  -20,126
  -21,139
  -22,204
  -23,320
  -24,492
  -25,722
  -27,014
Free cash flow, $m
  46,297
  48,836
  51,456
  54,187
  57,035
  60,006
  63,107
  66,346
  69,729
  73,266
  76,747
  80,615
  84,661
  88,897
  93,331
  97,974
  102,838
  107,933
  113,273
  118,870
  124,736
  130,887
  137,337
  144,101
  151,195
  158,637
  166,443
  174,634
  183,227
  192,245
Issuance/(repayment) of debt, $m
  15,166
  15,822
  16,480
  17,173
  17,905
  18,677
  19,491
  20,350
  21,256
  22,212
  23,220
  24,283
  25,403
  26,584
  27,827
  29,137
  30,516
  31,967
  33,495
  35,103
  36,794
  38,574
  40,445
  42,413
  44,482
  46,657
  48,944
  51,347
  53,873
  56,527
Issuance/(repurchase) of shares, $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 from financing (excl. dividends), $m  
  15,166
  15,822
  16,480
  17,173
  17,905
  18,677
  19,491
  20,350
  21,256
  22,212
  23,220
  24,283
  25,403
  26,584
  27,827
  29,137
  30,516
  31,967
  33,495
  35,103
  36,794
  38,574
  40,445
  42,413
  44,482
  46,657
  48,944
  51,347
  53,873
  56,527
Total cash flow (excl. dividends), $m
  61,462
  64,659
  67,936
  71,360
  74,939
  78,682
  82,598
  86,696
  90,986
  95,478
  99,968
  104,898
  110,065
  115,480
  121,158
  127,111
  133,353
  139,901
  146,768
  153,972
  161,531
  169,461
  177,782
  186,514
  195,677
  205,294
  215,387
  225,981
  237,100
  248,772
Retained Cash Flow (-), $m
  -8,330
  -8,785
  -9,150
  -9,535
  -9,941
  -10,369
  -10,822
  -11,299
  -11,802
  -12,332
  -12,892
  -13,482
  -14,104
  -14,759
  -15,450
  -16,177
  -16,943
  -17,749
  -18,597
  -19,489
  -20,429
  -21,416
  -22,455
  -23,548
  -24,697
  -25,905
  -27,174
  -28,508
  -29,911
  -31,385
Prev. year cash balance distribution, $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 flow adjustment, $m
  4,814
  5,117
  5,433
  5,762
  6,104
  6,462
  6,834
  7,223
  7,629
  8,054
  8,497
  8,960
  9,445
  9,952
  10,482
  11,037
  11,619
  12,228
  12,866
  13,534
  14,235
  14,969
  15,739
  16,546
  17,392
  18,280
  19,211
  20,187
  21,212
  22,287
Cash available for distribution, $m
  53,133
  55,874
  58,786
  61,825
  64,999
  68,313
  71,776
  75,397
  79,184
  83,146
  87,075
  91,416
  95,961
  100,721
  105,708
  110,934
  116,411
  122,152
  128,171
  134,483
  141,102
  148,044
  155,326
  162,966
  170,980
  179,389
  188,213
  197,472
  207,189
  217,387
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
  50,942
  51,151
  51,160
  50,907
  50,382
  49,577
  48,491
  47,125
  45,487
  43,590
  41,351
  39,010
  36,486
  33,814
  31,034
  28,191
  25,329
  22,496
  19,735
  17,089
  14,595
  12,284
  10,180
  8,300
  6,651
  5,234
  4,040
  3,055
  2,262
  1,637
Current shareholders' claim on cash, %
  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. (Apple) designs, manufactures and markets mobile communication and media devices, personal computers, and portable digital music players, and a variety of related software, services, peripherals, networking solutions, and third-party digital content and applications. The Company's products and services include iPhone, iPad, Mac, iPod, Apple TV, a portfolio of consumer and professional software applications, the iOS and OS X operating systems, iCloud, and a variety of accessory, service and support offerings. The Company also delivers digital content and applications through the iTunes Store, App StoreSM, iBookstoreSM, and Mac App Store. The Company distributes its products worldwide through its retail stores, online stores, and direct sales force, as well as through third-party cellular network carriers, wholesalers, retailers, and value-added resellers. In February 2012, the Company acquired app-search engine Chomp.

FINANCIAL RATIOS  of  Apple (AAPL)

Valuation Ratios
P/E Ratio 23.1
Price to Sales 4.9
Price to Book 8.3
Price to Tangible Book
Price to Cash Flow 17.5
Price to Free Cash Flow 22
Growth Rates
Sales Growth Rate 6.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -5.6%
Cap. Spend. - 3 Yr. Gr. Rate 5.5%
Financial Strength
Quick Ratio 4
Current Ratio 0.1
LT Debt to Equity 72.5%
Total Debt to Equity 86.3%
Interest Coverage 32
Management Effectiveness
Return On Assets 14.3%
Ret/ On Assets - 3 Yr. Avg. 16.7%
Return On Total Capital 20.8%
Ret/ On T. Cap. - 3 Yr. Avg. 25.3%
Return On Equity 36.9%
Return On Equity - 3 Yr. Avg. 40%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 38.5%
Gross Margin - 3 Yr. Avg. 39.2%
EBITDA Margin 33.3%
EBITDA Margin - 3 Yr. Avg. 34.4%
Operating Margin 26.8%
Oper. Margin - 3 Yr. Avg. 28.4%
Pre-Tax Margin 28%
Pre-Tax Margin - 3 Yr. Avg. 29.1%
Net Profit Margin 21.1%
Net Profit Margin - 3 Yr. Avg. 21.7%
Effective Tax Rate 24.6%
Eff/ Tax Rate - 3 Yr. Avg. 25.5%
Payout Ratio 26.4%

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 $229234 million for the last fiscal year's total revenue generated by Apple. The default revenue input number comes from 2017 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 6.3% 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 72.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 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 5.4% 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 2.1%.

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 16.9%.

Life of production assets of 10 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 -19.3%. 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 - $134047 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 5217 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 $1,135.1 billion.

Management's discussion and analysis

The Company designs, manufactures and markets mobile communication and media devices, personal computers and portable digital music players, and sells a variety of related software, services, accessories, networking solutions and third-party digital content and applications. The Company’s products and services include iPhone®, iPad®, Mac®, iPod®, Apple Watch®, Apple TV®, a portfolio of consumer and professional software applications, iOS, macOS™, watchOS® and tvOS™ operating systems, iCloud®, Apple Pay® and a variety of accessory, service and support offerings. 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® (collectively “Internet Services”). The Company sells its products worldwide through its retail stores, online stores and direct sales force, as well as through third-party cellular network carriers, wholesalers, retailers and value-added resellers. In addition, the Company sells a variety of third-party Apple compatible products, including application software and various accessories through its retail and online stores. The Company sells to consumers, small and mid-sized businesses and education, enterprise and government customers.

Fiscal 2016 Highlights

Net sales declined 8% or $18.1 billion during 2016 compared to 2015, primarily driven by a year-over-year decrease in iPhone net sales and the effect of weakness in most foreign currencies relative to the U.S. dollar, partially offset by an increase in Services. In April 2016, the Company announced a significant increase to its capital return program by raising the expected total size of the program from $200 billion to $250 billion through March 2018. This included increasing its share repurchase authorization from $140 billion to $175 billion and raising its quarterly dividend from $0.52 to $0.57 per share beginning in May 2016. During 2016, the Company spent $29.0 billion to repurchase shares of its common stock and paid dividends and dividend equivalents of $12.2 billion. Additionally, the Company issued $23.9 billion of U.S. dollar-denominated term debt and A$1.4 billion of Australian dollar-denominated term debt during 2016.

Fiscal 2015 Highlights

Net sales rose 28% or $50.9 billion during 2015 compared to 2014, driven by a year-over-year increase in iPhone net sales. iPhone net sales and unit sales in 2015 increased in all of the Company’s reportable operating segments. The Company also experienced year-over-year net sales increases in Mac, Services and Other Products. Apple Watch, which launched during the third quarter of 2015, accounted for more than 100% of the year-over-year growth in net sales of Other Products. Net sales growth during 2015 was partially offset by the effect of weakness in most foreign currencies relative to the U.S. dollar and lower iPad net sales. Total net sales increased in each of the Company’s reportable operating segments, with particularly strong growth in Greater China where year-over-year net sales increased 84%.
In April 2015, the Company announced a significant increase to its capital return program by raising the expected total size of the program to $200 billion through March 2017. This included increasing its share repurchase authorization to $140 billion and raising its quarterly dividend to $0.52 per share beginning in May 2015. During 2015, the Company spent $36.0 billion to repurchase shares of its common stock and paid dividends and dividend equivalents of $11.6 billion. Additionally, the Company issued $14.5 billion of U.S. dollar-denominated, €4.8 billion of euro-denominated, SFr1.3 billion of Swiss franc-denominated, £1.3 billion of British pound-denominated, A$2.3 billion of Australian dollar-denominated and ¥250.0 billion of Japanese yen-denominated term debt during 2015.

[Source: Form 10-K dated 2016-10-26]

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