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Financial Analysis and Comparison between Apple Inc. and Del

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Using the financial information of http://www.sec.gov/edgar.shtml as of December 31 of each year, calculate the P/E ratios each year for the last four quarters for Dell and Apple. Which company has made the strongest recovery in terms of profit margin and which has had the strongest growth in P/E ratio. Discuss why these results might be very different with reference to corporate finance policy.

Grading Criteria Maximum Points
Correctly located the Q1 and Q2 2004 10-Qs for each company. 15
Correctly located the corresponding stock price. 15
Correctly calculated a P/E ratio for Dell as of July 30 and April 30 versus the ratio for Apple as of June 27 and March 27. 25
Noted items in the company's reports that can be directly linked to higher valuations. 25
Total: 80

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Financial Analysis and Comparison between Apple Inc. and Dell Inc.

Apple, Inc.
2004 - Selected Quarterly Information
(In millions, except per share amounts)

Fourth Quarter Third Quarter Second Quarter First Quarter Notes:
9/25/2004 6/27/2004 3/27/2004 12/27/2003 For Apple's 2004 fiscal year, which ended September 25, 2004:
Net Sales $2,350 $2,014 $1,909 $2,006 Apple's P/E ratio, although having reached higher levels than that of Dell during 2004, is considerably more volatile,
Gross Margin 634 559 530 536 ranging from a low of 122.2 times earnings to a high of 225.3 times earnings. In comparing the diluted earnings
Net Income 106 61 46 63 per common share against the market value of the company's shares at the time, one can see the
Earnings per Common Share (Diluted) $0.26 $0.16 $0.12 $0.17 investment community's high expectations for continued growth in the company's future earnings. The increase
Price per Share $37.29 $33.70 $27.04 $20.78 in Apple's P/E ratio can be attributed to the second quarter announcement by the company that it would be introducing
P/E Ratio 143.4 210.6 225.3 122.2 it's new iMac computer later during the year (Apple 2004 Annual Report, p. 6).

A rapid rise in market value can lead to a rapid fall, as can be seen in the decline of Apple's P/E,
from 225.3 times earnings to a low of 143.4. With such volatility in its financial resuts, Apple Incorporated
although promising a higher return on investment than its more stable competitor, Apple Inc. during
2004, was not a ...

Solution Summary

Calculating P/E ratios and Profit Margin for Dell and Apple. Which is stronger?

$2.19
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