Apple Case

Beginning with Apple’s financials allowed various assessments to be performed for the company. First, using a horizontal analysis of the balance sheet, income statement, and cash flow statement showed that Apple still has growth every year, but the growth is slowing down. After performing an analysis comparing Apple to direct competitors, it remains that Apple is still on par with the industry and remains a force in electronics. After completing the weighted average cost of capital and capital pricing model, three stock price estimation models were computed to view what Apple’s stock price should be by the calculations. After completing the free cash flow to firm, free cash flow to equity, and the dividend discount models it was shown that apple is slightly undervalued at the time being. However, the stock price came out higher than on the market due to the high growth in the last decade that the company has been experiencing. This skewed the growth rates greatly in which an estimation of long term growth had to be made because growing at 70.5% forever is not feasible. Forecasting the markets for the next two years revealed that the electronic equipment industry is going to continue to grow rapidly alongside growing stable world economies. Considering that Apple has been an industry leader and has decent financials, it seems to be a sound company to invest into. Considering that the use of a smaller estimated growth rate was used rather than the 70.5% and the prices estimated were still over the market price, it is clear that the evaluation ranked Apple undervalued. However, with the recent year being the worst in the last decade, it brings in a risk factor to investing into a company that has reached its full potential. Overall, the recommendation would be to invest in Apple since it is undervalued according to the models.

Introduction

The purpose of this report is to do a full company financial analysis over Apple and the direct competitors within the electronic equipment industry. The contents of this report will include a macroeconomics analysis and forecasts, industry analysis and forecasts, and an in depth company analysis that will cover a wide range of key financial data, ratios, and stock valuation models with interpretation for Apple. After analyzing Apple, the recommendation to buy Apple will be made.

Macroeconomic Forecasts

Early this year, the International Monetary Fund issued its semiannual update to its World Economic Outlook which is a summary of global economic conditions and forecast for global growth. The January update shows economists expect global growth to accelerate in the next two years, driven by advanced economies. Also, the U.S. growth is due to accelerate in the next two years as well. Continued increase in jobs and income are likely to support improving consumer spending and business investment, while stronger global growth