Financial Research Report for Apple Inc

The Rationale for Selecting Apple Inc.

The financial manager settled for Apple Inc. as the best company to invest in. Apple was selected due to its good financial performance. The performed financial analysis demonstrated that the company provided a better chance for short-term and long-term investment. The company has managed to overcome a serious financial crisis. Moreover, the company has demonstrated growing stock value, increasing the possibility of earning profits for all its investors; both short-term and long-term investors. The stock was also selected because they have economic significance. They are highly likely to earn value and profit to an investor. The company had a high P.E than the industrial value, demonstrating its superiority in the market. The company stocks are highly valued and being the leading company in the digital technology company, its value is unlikely to go down (Nexus Uni, 4). Therefore, investing in this company is likely to be highly beneficial to any investor.

Apple Company was also selected since it matched the client’s needs. The investor is a young employee, who owns a few properties and savings in the bank. He is a risk averter and hence he is looking for a company with low investment risk and high chances of making a profit than experiencing losses. The young investor is willing to take a long-term investment where he can be earning dividends and make considerable profits selling his shares in the long-run. He is willing to invest in a company with a good financial foundation, and high chances of growth where dividend earned can be increasing with time. Apple qualifies due to its strong financial foundation. Its financial history and anticipated growth make it fit for risks averse investors.

Apple Ratio Analysis

This section gives financial ratio analysis for the Apple Company for the last three years; 2019, 2018, and 2017.

Current ratio

Current ratio = current assets/current liabilities (Investopedi, 2)

(Yahoo Finance, 5)

The company current ratio is more than one for the past three years. This shows that the company has good liquidity. It can manage to cater for its short-term obligations without a struggle. However, the company’s current ratio demonstrates an irregular trend. There is a ratio decline in 2018 and an increase in 2019. Although there is no time that ratio went below one, the irregularity can create fear of inconsistency to potential investors, especially those that are risk-averse.

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Quick ratio

Quick ratio = (current asset –inventory)/current liabilities (Investopedia, 2)

(Yahoo Finance, 5)

The company quick ratio is also above one. This demonstrates the company’s high liquidity. However, the growth trend irregularity identified in the current ratio is also reflected here.

Dividend per share

Divided per share = total number of dividends paid/number of shares outstanding

(Morningstar, 3)

Dividend per share refers to the sum of dividends issued by a firm for ordinary share outstanding. DPS is an essential metric to investors since the amount a company pays out in dividends translates directly to shareholder’s income. A growing DPS is a sign that a firm earnings growth can be sustained. Based on the analysis, the company DPS has been growing since 2017. This is an indication that Apple Company’s earnings growth is sustainable. This is a good sign to investors and an assurance that investors will be enjoying a growing return from their investment. A long-term investment in such a company demonstrates high chances for good earnings in the long-run.

Price-Earnings ratio

Price-Earnings ratio =Marketing earnings per share/earnings per share (Investopedia,2)

(Morningstar, 3)

Price per earnings is a ratio used in stock analysis. The company price-earnings ratio trend is similar to that of the current and quick ratio. The difference between P/E in 2018 and 2019 is considerably high, showing a great increase in the value. The company average P/E value for five years is 17.38. This shows that the company’s share value has been increasing with the best value being recorded in 2019. This shows that the company’s shares value is increasing, creating chances for higher earnings in the future.

Debt to equity ratio

Debt to equity ratio = Total liabilities/ shareholder equity (Investopedia, 2)

The debt to equity ratio is considerably high and has been increasing with time. This is a clear indication that the company has been depending on debts as its main form of capital financing. Over-reliance on debts for capital, financing increases the company’s financial risk. Debt increase the chances of losing the company’s assets in case of financial crises that may make it hard for a company to meet debts obligations. This means that investors are likely to lose their investments to creditors in case of a financial crisis. This risk discourages investors from investing in the company and is a bad sign of the company’s future abilities to survive serious financial crises.

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Apple Stock Prices Analysis

The financial ratio analysis demonstrates that the company has a strong financial foundation for investment. It has high liquidity, an increasing dividend per share ratio, and growing price-earnings. The price-earnings ratio is higher than the industrial value of 14.2 (Nexus Uni, 4). This is a clear indication that the company’s shares have a higher value than that of its competitors in the market, which demonstrates the company’s financial strength. The value is also growing to show the possibility of earning more in the future if one considers making a long-term investment. However, the company relies more on debts which increases its financial risks especially in case of the financial crisis in the company. This discourages people to purchase these stocks due to fear of the unknown. However, the positive participations outweigh negatives and hence Apple company stock still seems good for investment.

Recommendation

Apple Company is a recommendable company for stock investment. The company demonstrates a good financial foundation and growth. Being a leading company in the technology industry that has invest a lot in innovation, Apple has managed to maintain good financial performance for a long time. The company has always managed to bounce back and continue growing even after experiencing short-term challenges (Aljafari, 1). The year 2018 seems to have been a bad year for the company. However, the company was able to bounce back and perform much better in 2019, more than it had performed in 2017. This demonstrates high financial resilience in Apple. The company stock analysis demonstrates that its shares are highly valued in the industry, and their values have a great potential to keep on growing. In this regard, Apple is a good company to invest in. Although the company relies more on debts, it makes enough sales to ensure that its revenue is enough to cater for loan repayment and interest cost. This means that the company’s risk of loss to creditors is considerably low as long as its revenue is high. This means any investor can comfortably invest in the company with no fear of losing their investment.

List of Sources

1. Aljafari, Abdulla. 2016. Apple Inc. Industry Analysis Business Policy and Strategy. International Journal of Scientific & Engineering Research, vol.7, no.3. pp. 406-441
2. Investopedia. 2010. Financial Ratios Tutorial https://i.investopedia.com/inv/pdf/tutorials/financialratio.pdf
3. Morningstar. 2020. Apple Inc. AAPL. https://www.morningstar.com/stocks/xnas/aapl/analysis
4. Nexus Uni. 2020. Apple Inc. https://www-lexisnexis-com.libdatab.strayer.edu/newlexisdossier/companyreporting/start.do?prod=CD&cdcomp=e2c7916916ef85739ac7ba612554f0ed:e2c7916916ef85739ac7ba612554f0ed:6_T653757497&host=NexisUni&LC=US&entityId=3800094&reportKey=snapshot_report&ticker=AAPL&countryName=UNITED%20STATES&disclosure=&companyName=Apple+Inc.&companysCountry=Public&sicCode=3575&desc=Computer+Terminals
5. Yahoo Finance. 2020. Apple Inc. (AAPL). https://finance.yahoo.com/quote/AAPL/analysis?p=AAPL