Apple’s 15.6% return over the past six months has outpaced the S&P 500 by 8%, and its stock price has climbed to $261.19 per share. This was partly thanks to its solid quarterly results, and the performance may have investors wondering how to approach the situation.
Is it too late to buy AAPL? Find out in our full research report, it’s free.
Why Does Apple Spark Debate?
Creator of the iPhone and App Store, Apple (NASDAQ: AAPL) is a legendary developer of consumer electronics and software.
Two Positive Attributes:
1. Excellent Free Cash Flow Margin Boosts Reinvestment Potential
Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
Apple has shown terrific cash profitability, enabling it to reinvest, return capital to investors, and stay ahead of the competition while maintaining an ample cushion. The company’s free cash flow margin was among the best in the consumer discretionary sector, averaging 26.6% over the last five years.
2. New Investments Bear Fruit as ROIC Jumps
We like to invest in businesses with high returns, but the trend in a company’s ROIC can also be an early indicator of future business quality.
We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Apple’s ROIC has increased significantly. This is a great sign when paired with its already strong returns. It could suggest its competitive advantage or profitable growth opportunities are expanding.
One Reason to be Careful:
Lackluster Revenue Growth
Long-term growth reigns supreme in fundamentals, but for big tech companies, a stretched historical view may miss emerging trends in AI. Apple’s recent performance shows its demand has slowed as its annualized revenue growth of 6.3% over the last two years was below its five-year trend. We’re wary when companies in the sector see decelerations in revenue growth, as it could signal changing consumer tastes aided by low switching costs. 
Final Judgment
Apple’s merits more than compensate for its flaws, and with its shares topping the market in recent months, the stock trades at 30.7× forward price-to-earnings (or $261.19 per share). Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
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