Part 1
I have advised my client to invest in Apple
Inc. stocks. One of the core reasons for suggesting all this is that Apple Inc.
is a reputed company; The stock prices are always good, and customer loyalty is
guaranteed. In addition, the company has committed itself to provide the best
and most innovative products. In 2007, when the iPod was launched, Apple Inc.
took no time to gain global recognition and today, it has become one of the
most successful companies in the world. A 2015 report by Forbes reveals that
some of its recent items are ranked high in the world of technology, with an
approximate value of $625 billion (Forbes, 2015). Since 2012, Apple Inc. has
been regarded as the most valuable brand. Its market cap is said to be better
than that of Microsoft, Google, and Facebook. As of 2010, Apple’s global
revenues were $65 billion, which grow by $127 billion in 2011 and $155 billion
in 2012. From 2001 to 2014, the company’s stock prices have increased from
$1.45 to $110.35 (Investopedia, 2015). In this period, the ratio of earnings
was more than the company’s market shares. It was because of the innovated
range of products Apple Inc. had launched and due to great loyalty programs.
Most recently, USA Today revealed (2015) that Apple’s stock prices have come
down to an extent, dropping by 10% from the high stock prices of $133. This
decline does not mean Apple Inc. is not an ideal option for my client, as the
value of its stock is still great. Thus, it provides a good buying opportunity
for my client. Besides being innovative, Apple Inc. is widely famous for
reinventing its existing product lines. For instance, the iPod evolved to the
iPod Mini, the iPod Touch, the iPod Shuffle, the iPod Classic, the iPod Nano,
the iPhone and the iPad. The same is the condition of its iPhone series, which
clearly indicates that Apple Inc. can shape the future of any investor.
Before selecting a suitable option for my
client, it was important for me to determine the client’s profile and align it
with the most perfect brand so that the goals can be met. The first step I took
was to understand my investor. It is a common observation that some investors
are ready to invest for a long period as they want the best out of their
investments. On the other hand, some investors like to buy stocks that give
quick and sufficient returns. My client did not mind investing for a relatively
longer period, which is why I chose Apple Inc. for them. The client has
significant capital and is interest in long-term commitments and excellent
gains rather than quick returns. In addition, my client wants to experience a
mild market fluctuation and does not care about the time the company will take
to give them some profits.
For this particular client, the strategy I
have decided to use is to buy a sufficient number of stocks that can be
classified depending on their value and growth rate. The client is okay with
the policy that their amount will be held for a long period as they aim to
develop capital. By investing in Apple Inc., they will be able to gain huge
profits in the coming months or years and can be assured of their bright
future.
As already mentioned, I have asked my client
to invest in the stock of Apple Inc. One of the core reasons why I have taken
this decision is that the company provides investors with good returns, great
consumer loyalty programs, and outstanding offers. For many years now, Apple
Inc. has grown to an extent, and its products are proudly sold in all parts of
the world. In 2015, Forbes published a report in which it was clearly mentioned
that most of Apple’s products have topped many lists in the world of technology
(Forbes, 2015). The same year, a report was presented by Investopedia in which
it was clearly mentioned that from 2001 to 2014, Apple Inc. had seen tremendous
success and its stock prices had risen from $1.46 to $110.37 (Investopedia,
2015). In addition to the increased stock prices, the company’s ratio of
earnings was ahead of the market shares. This was made possible due to the
innovative products Apple Inc. was introducing to the global markets almost
daily.
In 2015, USA Today reported that the stock
prices dropped somewhat (USA Today, 2015). However, this decline did not leave
a bad impact on the investors, and I kept encouraging my client to invest in
Apple Inc. as its stocks are worth the prices.
Apple Inc. is widely known for its range of
quality products, such as iPod and iPhone, etc. By the whole, the company’s
stocks have been receiving good response, and it is the best option for my
client. Apple Inc. keeps developing innovative products every month, and its
Apple Store has added value to the overall growth and success level of the
company.
Part 2
The client was encouraged to invest in
Apple’s stocks as they give very good returns. I suggested this company to the
client because they want to invest somewhere where long term investments are
supported. I want my client to have good returns for the time and money they
invest, and I do not think any other company is as effective and well versed as
is Apple Inc. This is one of those clients who do not believe in investing for
a short term; instead, they want their money to be invested somewhere for a
long term, and in returns, they expect good amounts. The loyalty programs of
Apple Inc. are good to go with, and the company’s offers to investors are also
great. This company has been dominating the tech industry for years and the
trust of investors has been built. Top websites like Investopedia and Forbes
have praised Apple Inc. for the quality and affordability of its products. The
company’s stock value got improved with time, despite a slight decline seen
some years ago.
In order to support my recommendations for
the client to invest in Apple Inc., I had to determine the financial health of
the company. For this purpose, I reviewed and analyzed the last three years’
performance of Apple Inc. and made the wise use of its financial statements,
documents or data available online and offline. According to Auerbach (2005),
ratios of a company can be used to learn more about its current financial
health as well as the potential. On the basis of my client’s investment ideas
and overall profile, I had to use different ratios such as quick ratio,
earnings per share, current ratio, basic earning power and debt to equity.
The quick ratio helped measure the liquidity
of Apple Inc. It indicates whether the company has enough liquid and cash
resources for paying back the liabilities or short-term debts or not. I
determined this ratio by subtracting the inventories from the current assets
and by dividing the balance by the current liabilities. As of June 2015, the
quick ratio of Apple Inc. is 1.05 which is based on values like current assets
($70,953,000), current liabilities ($65,285,000) and inventory ($2,042,000).
The quick ratios for the past few years were determined using the same formula,
and this demonstrated that Apple Inc. was able to pay off the current
liabilities without any major issue.
Just like the quick ratio, the current ratio
of Apple Inc. had the same kind of value. It showed a proportion of the current
assets of the company with respect to its current liabilities. This ratio was
determined by dividing the current assets by current liabilities. As of June 2015, the company’s current ratio
was 1.09 which was based on values like current assets ($70,953,000) as well as
current liabilities ($65,285,000.) The same formula was used for calculating
the current ratio of 2014 and 2013. I concluded that the current ratios for the
past few years were reliable, which means the company’s assets outweighed its
liabilities. It made me understand that Apple Inc. had good financial health.
The earnings per share ratio helped determine
the success level and profitability of the company. This showed how every
stockholder was being paid. In order to determine this value, I divided the net
income to stockholders by the outstanding shares. As of 2014, the earning per
share was $6.49 which was based on the net income ($39,510,000) as well as on
the common stock shares outstanding (6,085,572). Positive earnings per share
was noticed which made it clear that the shareholders were going to be paid fairly
for their investments.
The basic earning power ratio helped
determine if Apple Inc. was worth the investment. This demonstrated the power
of the company to influence taxes and leverage. I determined this value by
diving the earnings before interest and taxes (EBIT) by the total sales. As of June 2015, the basic earning power
ratio of Apple Inc. was 0.32 which was based on values like interest and taxes
($57,453,000) as well as on the total sales ($182,214,000). The values of the
past few years were obtained in the same way and I concluded that Apple Inc.
was growing day by day and generating huge profits out of its innovative
products.
On the basis of the financial information, I
was confident that Apple Inc. was going to give good returns to my client.
I was also responsible for taking all the
possible risks into consideration and for providing the best and most suitable
recommendations to my client. The risk level seemed to be low, as my client was
ready to invest for a long period and most of the stocks Apple Inc. provides to
its investors give good returns after some years. However, if the company loses
money because of the crashes in the market, it will have to sustain innovation.
My client is aware of the fact that risks are always accompanied with these
kinds of investments. I recommend them to invest in a mixed range of products
rather than focusing on a single item. Another suggestion is to keep the
investments reserved for a short period.
I want my client to invest in a product or
two for some months in the beginning. If they see that good returns are being
provided, then they can consider investing for a long period. This choice is
made because the net income of Apple Inc. grew up to $10 billion in the fiscal
third quarter that ended in June 2015.
References
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Investor Relations. N.p., 2015. Web. 22 Aug. 2015.
Auerbach, A. (2005).
How to analyze your business using
financial ratios. Business Builder.
Zions Bank, Edward Love Foundation
Brigham, E. F., & Ehrhardt, M. C. (2014). Financial management (14th ed.). Mason,
OH: South-Western Cengage Learning.
"GuruFocus Premium Plus Membership." Apple
Inc. (AAPL) Stock Analysis. N.p., n.d. Web. 22 Aug. 2015.
"Historical Stock Prices." (AAPL) Historical
Prices & Data. N.p., 2015. Web. 22 Aug. 2015.
Krantz, Matt. "How Investors Should Play Falling
Apple Stock." USA Today. Gannett, 10 Aug. 2015. Web. 22 Aug. 2015.
McWhinnie, Eric. "5 Reasons Why You Should Still Buy
Apple Stock Today." The Cheat Sheet. N.p., 01 Aug. 2015. Web. 22 Aug.
2015.
"2015 BrandZ Top 100 Global Brands." Millward
Brown. N.p., n.d. Web. 22 Aug. 2015.
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Forbes Magazine, 2005. Web. 22 Aug. 2015.
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