Apple is ripe for the picking as long as its stock gets just below these levels.

I am typing on an Apple.  I have been doing so since 1986, although this computer is newer than my first Plus.  That is over thirty years.  They make great products, as the iPhone shows.  They have great integration with their products.  Everything works together and it works well.  But, is the stock priced about where it should be?

If I had to rate this stock I would say it is below average.  Case in point, looking at what you are investing in via earnings.  After all, that is what it is all about

Published over a year ago
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Reviewed by Ellen Johnson

Apple has had strong earnings for some time.  Their stock is slightly above a level I would consider as a strong buy.  I am looking to add this stock in to my own portfolio to get a piece of the pie myself as long as the price dips to levels we saw just a few months ago.  Consider this company into your own portfolio.  

Apple financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures the total debt position of Apple, including all of Apple's outstanding debt obligations, and compares it with the equity. In simple terms, the high financial leverage means the cost of production, together with running the business day-to-day, is high, whereas, lower financial leverage implies lower fixed cost investment in the business and generally considered by investors to be a good sign. So if creditors own a majority of Apple assets, the company is considered highly leveraged. Understanding the composition and structure of overall Apple debt and outstanding corporate bonds gives a good idea of how risky the capital structure of a business is and if it is worth investing in it. Please read more on our technical analysis page.

Understanding Apple Total Liabilities

Apple Inc liabilities are broken down into two parts on the balance sheet. These are short-term (or current) obligations and long-term debt. Apple Inc has to fulfill its short-term liabilities in this reporting year and should be no more than 12 months old. Long-term debt, on the other hand, is anything beyond the 12-month payment timeframe. Common short-term liabilities found on Apple balance sheet include debt obligations and money owed to different Apple vendors, workers, and loan providers. Below is the chart of Apple short long-term liabilities accounts currently reported on its balance sheet.
You can use Apple Inc financial leverage analysis tool to get a better grip on understanding its financial position

How important is Apple's Liquidity

Apple financial leverage refers to using borrowed capital as a funding source to finance Apple Inc ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. Apple financial leverage is typically calculated by taking the company's all interest-bearing debt and dividing it by total capital. So the higher the debt-to-capital ratio (i.e., financial leverage), the riskier the company. Financial leverage can amplify the potential profits to Apple's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its debt costs. The degree of Apple's financial leverage can be measured in several ways, including by ratios such as the debt-to-equity ratio (total debt / total equity), equity multiplier (total assets / total equity), or the debt ratio (total debt / total assets). Please check the breakdown between Apple's total debt and its cash.

Going after Apple Financials

Is it safe to get into Apple?  

I am typing on an Apple.  I have been doing so since 1986, although this computer is newer than my first Plus.  That is over thirty years.  They make great products, as the iPhone shows.  They have great integration with their products.  Everything works together and it works well.  But, is the stock priced about where it should be?

If I had to rate this stock I would say it is below average.  Case in point, looking at what you are investing in via earnings.  After all, that is what it is all about:

2013:    $6.49 

2014:    $9.28  

2015:    $8.35

The stock is trading at $120 per share.  That is about 15-times earrings.  Interestingly, that is about average for the past 50 years.  But, and this is why I call the stock below average, the average today is roughly 26-times earnings.  Therefore, Apple is trading below that.  

To be fair, Apple was trading at about $90 per share just a few months ago.  Had you picked it up you would be sitting on a very nice, roughly 50% return in just a few months’ time.  Not bad.  But, you would have had a tough time predicting the Trump presidential victory, as nearly the entire world was caught off guard, and you would have had a tough time predicting the after-election rally.  So, it might have been a bit tough buying in to Apple at that point, and you are forgiven for missing the opportunity.  

I believe that the overall market is going to come down.  And, it might be that Apple falls down as well.  Given that I believe that there may be an opportunity to pick this stock up at a better entry-to-earnings ratio.  Investing in any stock is all about earnings.  Sure, there are other variables to factor in, but all those other variables amount to the end result of either better earnings or lower earnings.  When I look at these other variables, such as cashflow-to-earnings ratio or return on investment, I am looking at them with an eye towards whether or not earnings are going to outpace current levels.  

Apple is geared up to be earning more revenue over the next few years and their ability to outpace the past is there, albeit at a slightly elevated level.  Given that, I have always wanted to own Apple.  I am going to be looking to pick up this stock once the market corrects itself and Apple dips back down to about the $90 level again, should it fall that low.  

There is one catch, though.  Apple has a lot of competition in the mobile phone department.  Seems at one time they were the only game in town.  Now, every company out there is working to chip away at the mystique that Apple once had.  I still very much believe that Apple can hold on to its superiority in that department, this, despite the recent unimpressive sales of the iPhone 7.  Seems everyone is waiting for the 8, including me.  

Take a strong look at the numbers on Apple including the sales and revenue.  There are some impressive growth numbers there that should you be able to pick up this stock you will be glad you did.  Apple is a very long term holding for any portfolio.  They have proven themselves time and again.  The only question you should have is at what price to buy, and I would say that if you were given a $90 price again, you should take the offer. 

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Editorial Staff

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