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Apple, Inc: Stock price analysis

Select a publicly traded U.S. company that has paid a dividend for at least the last three years, and conduct a financial ratio analysis. You will be using this company for other assignments in this course; thus, please spend adequate time locating a company. Please consider reviewing http://finance.yahoo.com to locate a company. The company must have data available for you to conduct a financial ratio analysis. It's important to select a company in an industry that has industry ratio numbers. You cannot select a privately held company.

Calculate all the following ratios for the company for the past three years and compare them to the appropriate industry benchmarks:

Liquidity ratios:

Current

Quick

Asset Management ratios:

Inventory turnover

Total assets turnover

Fixed assets turnover

Days sales outstanding

Debt Management ratios:

EBITDA coverage

Times-interest-earned

Total debt to total assets

Profitability ratios:

Return on common equity

Return on total assets

Basic earning power

Profit margin on sales

Market Value ratios:

Market/book

Price/earnings

Price/cash flow

Complete the following in a Word document covering 3-4 pages:

Create a table that contains the ratios for the various years. Then analyze the information. Look at the trends in the ratios and comment on how they compare to the industry benchmarks. Which ratios are strong? Which ratios need improvement? If you were a stock investor, would you buy the company's common stock? Why or why not? If you were a bond investor, would you buy the company's bonds? Why or why not?

Solution Preview

Apple, Inc.: Stock Analysis
Below is a chart of Apple, Inc.'s (NasdaqGS: AAPL) cash dividends for the last 3 decades.
Year Cash Dividends
2014 $ 1.84571
2013 $ 1.68570
2012 $ 0.75714
1995 $ 0.01716
1994 $ 0.01716
1993 $ 0.01716
1992 $ 0.01716
1991 $ 0.01716
1990 $ 0.01608
1989 $ 0.01464
1988 0.01215
1987 $ 0.00714
Source: Yahoo! Finance
Apple, Inc.'s stock prices:
September 27, 2014 $100.32 (Yahoo! Finance)
September 28, 2013 $67.15 (Yahoo! Finance)
September 29, 2012 $90.63 (Yahoo! Finance)
Based on Yahoo! Finance, Apple, Inc. together with Blackberry, Google, and Hewlett-Packard belongs to the Electronic Equipment industry. Industry data was sourced from Yahoo!'s industry center. Only a few of the industry statistics pertaining to the ratios are available.
Apple, Inc.'s interest income is much larger than the company's interest expense resulting to a positive other income. Also, in computing for the company's EBITDA coverage, since the depreciation and amortization expenses were not reported in the face of the income statement, I used the company's operating income instead of its EBITDA. When computing the company's price/cash flows ratio, the cash flows provided by the company's operating activities was used.
2014 2013 2012 Industry
Liquidity ratios:
Current 0.57 0.88 ...

Solution Summary

Apple, Inc: Stock price analysis is given.

$2.19