Apple Inc. (AAPL)

Comparison analysis | Discount cash flow analysis

5% margin of safety What's this?

Dollar

Point

View full valuation >

Within margin of safety Undervalued by 0.6%

Dbbuynow

How does this work?

This is an interactive analyst report for Apple Inc., based on a discounted cash flow valuation approach.

You can modify the assumptions and the valuation will be updated automatically. You can also save and share your valuation.

Values in $ millions

2008	2009	2010	2011	2012	2013	2014	2015

What will the revenues be in the future?

Growth beyond year three is driven by the terminal growth rate.

EBITDA Margin (%)

2008	2009	2010	2011

What will the profit margins be in the future?

EBITDA is Earnings Before Interest, Tax, Depreciation and Amortisation.

Values in $ millions

	2008	2009	2010	2011	Terminal

What will capital expenditure will be required in the future?

Capital investment beyond year three is driven by the terminal figure.

Values in $ millions

2008	2009	2010	2011

What will the depreciation be in the future?

Capital Expenditure is the cash that the company actually spends and Depreciation is the accounting treatment

	Figures (millions)
Enterprise value:	100,423
Equity value:	124,913
Net debt:	-24,490
Value of equity:	124,913
Shares outstanding:	892,000,000
Valuation updated:	03 Jul 2009
Valuation views:	1

Valuation Assumptions What are these?





Discount Rate (%)	Terminal Growth (%)	Tax (%)

Dollar

Point

Implied share price

Within margin of safety Overvalued by 0.1%

Dbbuynow

Valuation metric: What's this?

AAPL	DELL	JAVA	IM	PALM

What is EV / Revenue?

Measures the value of each dollar of revenue (EV terms).

Higher means that the revenue is more highly valued (because of growth, profitability, etc).

Lower compared to peers may represent an opportunity - cheap.

AAPL	DELL	JAVA	IM	PALM

What is Market cap / Revenue?

Measures the value of each dollar of revenue (Market Cap terms).

Higher means that the revenue is more highly valued (because of growth, profitability, etc).

Lower compared to peers may represent an opportunity - cheap.

AAPL	DELL	JAVA	IM	PALM

What is EV / EBITDA?

Measures the value of each dollar of EBITDA (EV terms).

Higher means that the EBITDA is more highly valued (because of growth, margin, etc).

Lower compared to peers may represent an opportunity - cheap.

AAPL	DELL	JAVA	IM	PALM

What is EV / EBIT?

Measures the value of each dollar of EBIT (EV terms).

Higher means that the EBIT is more highly valued (because of growth, margin, etc).

Lower compared to peers may represent an opportunity - cheap.

AAPL	DELL	JAVA	IM	PALM

What is Market cap / EBITDA?

Measures the value of each dollar of EBITDA (Mkt Cap terms).

Higher means that the EBITDA is more highly valued (because of growth, margin, etc).

Lower compared to peers may represent an opportunity - cheap.

AAPL	DELL	JAVA	IM	PALM

What is Market cap / EBIT?

Measures the value of each dollar of EBIT (Mkt Cap terms).

Higher means that the EBIT is more highly valued (because of growth, margin, etc).

Lower compared to peers may represent an opportunity - cheap.

AAPL	DELL	JAVA	IM	PALM

What is Price / Earnings?

Measures the ratio of the current price per share and the earnings per share.

Higher means that the revenue is more highly valued (because of growth, profitability, etc).

Lower compared to peers may represent an opportunity - cheap.

AAPL	DELL	JAVA	IM	PALM

What is Return on Assets?

Measures the profitability of the company relative to the company's total assets.

Higher is better - but the key is comparaing against peer companies in the same industry.

AAPL	DELL	JAVA	IM	PALM

What is Return on Equity?

Measures the profitability of the company relative to the company's shareholders equity.

Higher is better - but the key is comparaing against peer companies in the same industry.

	Apple Inc. AAPL	Dell Inc. DELL	Sun Microsystems, Inc. JAVA	Ingram Micro Inc. IM	Palm, Inc. PALM
All amounts in millions Values from last financial year
Ratios
EV / revenue	3.09	0.3	0.39	0.07	3.18
Market cap / revenue	3.85	0.41	0.5	0.08	2.99
EV / EBITDA	14.78	4.3	4.02	5.16	-10.27
EV / EBIT	16.0	5.26	8.16	5.98	-9.34
Market cap / EBITDA	18.39	5.97	5.08	5.73	-9.66
Market cap / EBIT	19.91	7.3	10.32	6.65	-8.78
Price / earnings ratio	25.2	12.86	-3.44	-6.56	-2.35
EV / total assets	2.54	0.69	0.38	0.36	3.64
Market cap / total assets	3.16	0.96	0.48	0.4	3.42
Market capitalisation:	124,913	25,343	6,872	2,842	2,200
Net Debt (LT Borrowings - Cash)	-24,490	-7,081	-1,436	-285	138
Enterprise Value (EV)	100,423	18,262	5,436	2,557	2,338
Revenue (Last Financial year - LFY)	32,479	61,101	13,880	34,362	735
EBITDA (LFY)	6,794	4,243	1,353	495	-227
Percent	20.9 %	6.9 %	9.7 %	1.4 %	-30.9 %
EBIT	6,275	3,474	666	427	-250
Percent	19.3 %	5.7 %	4.8 %	1.2 %	-34.0 %
Balance sheet
Total assets	39,572	26,500	14,340	7,083	643
Total liabilities	18,542	22,229	8,752	4,427	751
Shareholders equity	21,030	4,271	5,588	2,655	-108.066
Implied share price	$139.95	$100.25	$59.40	$657.68	$15.28

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Sensitivity matrix

		-1%	Discount Rate % 0%	1%
	-1%	$141.94	$140.01	$138.15
Terminal Growth%	0	$142.80	$140.83	$138.95
	+1%	$143.67	$141.67	$139.76

How does a change in discount rate or terminal growth affect valuation?

This table shows the sensitivity of the valuation to two key variables - the discount rate and the terminal growth rate

Valuations and comments

Valuecruncher created a new valuation of $140.83 (undervalued by 0.58%) - 10 hours ago
divechip created a new valuation of $150.84 (undervalued by 8.14%) - 10 days ago
divechip created a new valuation of $140.67 (undervalued by 0.85%) - 10 days ago
seamuskrat created a new valuation of $140.59 (undervalued by 3.31%) - 17 days ago
jschern created a new valuation of $164.59 (undervalued by 20.16%) - 17 days ago
jschern created a new valuation of $116.05 (overvalued by 15.27%) - 17 days ago
jschern created a new valuation of $157.75 (undervalued by 15.17%) - 17 days ago
GordonGekko created a new valuation of $140.57 (undervalued by 2.63%) - 17 days ago
kdevcich created a new valuation of $164.66 (undervalued by 15.37%) - 23 days ago
kdevcich created a new valuation of $140.59 (overvalued by 1.49%) - 23 days ago
kdevcich created a new valuation of $139.48 (overvalued by 2.27%) - 23 days ago
GordonGekko created a new valuation of $139.16 (overvalued by 1.27%) - 28 days ago
dimpi created a new valuation of $93.67 (overvalued by 28.38%) - 1 month ago
ckc2 created a new valuation of $126.68 (overvalued by 0.44%) - 2 months ago
ckc2 created a new valuation of $145.62 (undervalued by 17.53%) - 2 months ago
SethWellbourne created a new valuation of $101.20 (overvalued by 16.89%) - 2 months ago
Brownmp created a new valuation of $141.59 (undervalued by 14.72%) - 2 months ago
GordonGekko created a new valuation of $125.75 (undervalued by 9.35%) - 2 months ago
SethWellbourne created a new valuation of $121.48 (undervalued by 2.56%) - 2 months ago
SethWellbourne created a new valuation of $115.44 (undervalued by 10.48%) - 3 months ago
mlongval created a new valuation of $100.82 (overvalued by 0.76%) - 3 months ago
rs12345 created a new valuation of $91.18 (undervalued by 2.63%) - 3 months ago
rs12345 created a new valuation of $78.43 (overvalued by 11.72%) - 3 months ago
GordonGekko created a new valuation of $96.00 (undervalued by 0.1%) - 7 months ago
GordonGekko created a new valuation of $118.87 (undervalued by 10.48%) - 8 months ago
GordonGekko created a new valuation of $125.99 (undervalued by 29.79%) - 9 months ago
TheCrunchBlog created a new valuation of $163.98 (undervalued by 16.37%) - 9 months ago
andrew created a new valuation of $91.09 (overvalued by 49.72%) - 1 year ago
LordTrask created a new valuation of $150.67 (overvalued by 16.84%) - 1 year ago
benkepes created a new valuation of $74.80 (overvalued by 59.84%) - 1 year ago
Abo created a new valuation of $100.47 (overvalued by 46.6%) - 1 year ago
jeremy created a new valuation of $199.59 (undervalued by 6.07%) - 1 year ago
GordonGekko created a new valuation of $144.74 (overvalued by 19.59%) - 1 year ago
lancewiggs created a new valuation of $219.71 (undervalued by 29.45%) - 1 year ago
Philip created a new valuation of $116.63 (overvalued by 37.33%) - 1 year ago
KiwiEMH created a new valuation of $166.28 (overvalued by 10.65%) - 1 year ago
jeremy created a new valuation of $200.12 (undervalued by 7.53%) - 1 year ago
TheCrunchBlog created a new valuation of $146.70 (overvalued by 21.17%) - 1 year ago
TheCrunchBlog created a new valuation of $197.63 (undervalued by 6.2%) - 1 year ago
stuartm created a new valuation of $228.96 (undervalued by 23.52%) - 1 year ago
acoy created a new valuation of $96.26 (overvalued by 47.0%) - 1 year ago
andrew created a new valuation of $99.27 (overvalued by 40.71%) - 1 year ago
Gaurav created a new valuation of $175.53 (overvalued by 5.68%) - 1 year ago
TheCrunchBlog created a new valuation of $149.75 (overvalued by 9.95%) - 1 year ago
jeremy created a new valuation of $156.43 (overvalued by 6.98%) - 1 year ago

Comments

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The boring details

All amounts in millions	Figures
Enterprise Value:	100,423
Net Debt (Long-term borrowings less cash):	-24,490
Equity Value:	124,913
Number of Shares Outstanding:	892,000,000
Calculated value per share:	$140.83

Enterprise Value is the present value of the post-tax cash flows for a business into the future.

Calcuation of EV

Where:

C1, C2, C3 - the cash flow in period 1, 2, 3, ...
r - the discount rate

To capture the cash flows into the future a terminal value is calculated via a perpetuity calculation -
based on the final years forecast post-tax free cash flow.

Perpetuity

Where:

Cn - the cash flow in the final forecast period.
LTG - the long-term growth rate
r - the discount rate
g - the terminal growth rate

The Capital Asset Pricing Model (CAPM) is used to determine the equity component in the discount rate.

CAPM model

Where:

rt - the risk free rate
t - the tax rate
B - the beta of the company
MRP - the Market Risk Premium

Valuecruncher uses an estimate of Weighted Average Cost of Capital (WACC) to determine the discount rate in the calculation.