Introduction
This is the final case of Level 5. We are going to analyze Apple (AAPL) using ALL Levels 1-5 metrics. This analysis integrates everything: profitability, efficiency, liquidity, debt, valuation, and comps.
Explanation
Apple Inc. - 360° Analysis (FY2023) 1. INCOME STATEMENT: - Revenue: $383B (+0% YoY - stagnant) - Gross Profit: $170B (Gross Margin 44%) - EBITDA: $130B (EBITDA Margin 34%) - Net Income: $97B (Net Margin 25%) - EPS: $6.13 (diluted) 2. BALANCE SHEET: - Cash + ST Investments: $62B - Total Current Assets: $143B - PP&E: $44B - Goodwill + Intangibles: $82B - Total Assets: $353B - Total Debt: $112B - Net Debt: $50B - Shareholders Equity: $62B 3. CASH FLOW: - Operating Cash Flow: $110B - CapEx: $11B - Free Cash Flow: $99B - Dividends Paid: $15B - Share Buybacks: $77B 4. KEY RATIOS: - Current Ratio: 0.98 (slightly low) - Quick Ratio: 0.82 - Cash Ratio: 0.42 (excellent) - Debt/Assets: 32% (moderate) - Interest Coverage: 40× (super safe) - ROE: 160% (artificially inflated by massive buybacks) - ROA: 27% (excellent) - ROIC: 50%+ (exceptional) - Asset Turnover: 1.08× - Inventory Turnover: 40× (11 days) - Cash Conversion Cycle: ~15 days (excellent)
Example
RATING: - Market Cap: $3.0T - Enterprise Value: $3.05T - P/E: 30× - EV/EBITDA: 23× - EV/Revenue: 8× - PEG: 3.0 (high, growth only 8%) - Price/FCF: 30× COMPARABLES (vs MSFT, GOOGL average): - Apple P/E 30× vs Sector 28× (slight premium) - Apple EBITDA Margin 34% vs Sector 40% (lower) - Apple Growth 0% vs Sector 10% (much lower) - Apple ROIC 50%+ vs Sector 30% (higher)
How to read it
COMPLETE ANALYSIS: ✅ STRENGTHS: 1. Extreme Profitability: Net Margin 25%, ROIC 50%+, ROA 27% = elite 2. Cash Generation: $99B annual FCF = cash machine 3. Operational Efficiency: Inventory Turnover 40×, CCC 15 days = world-class management 4. Financial Health: Interest Coverage 40×, Cash $62B = very safe 5. Moat Fuerte: Ecosystem, brand, high switching costs 6. Capital Return: $92B distributed (dividends + buybacks) ❌ WEAKNESSES: 1. Stagnant Growth: Revenue flat, growth ~0% 2. Face Valuation: P/E 30, PEG 3.0 for low growth 3. Current Ratio <1: Technically negative liquidity (but with $62B cash it is not a real problem) 4. iPhone dependency: ~50% of revenue, risk of saturation 5. Margins Below MSFT: EBITDA 34% vs MSFT 50% INVESTMENT DECISION: Apple is an EXCELLENT company but with a FULL rating. With P/E 30 and ~0% growth, you need to believe in: 1. Growth acceleration (Vision Pro, services, India) 2. Margin expansion 3. Sustainable multiple 25-30× for quality If you think Apple will grow 8-10% next 5 years, P/E 30 is reasonable. If you think that growth will remain flat, it is expensive. Warren Buffett (Berkshire is the largest shareholder) is betting on sustainable moat and cash generation, not explosive growth.
Key takeaways
- Apple: elite profitability (ROIC 50%, ROA 27%)
- Massive cash generation: $99B FCF
- World class operational efficiency (CCC 15 days)
- Strong Moat: ecosystem, brand, switching costs
- Problem: stagnant growth 0%
- Full Valuation: P/E 30, PEG 3.0
- Investment requires faith in reacceleration or sustainable moat