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Apple 2011 4Q financial analysis

Apple 4Q results was quit impressive. Revenue jumped from 26,7 bn.$ up to 46,3 bn.$  (Δ+73%) which lead to Net income before Depreciation increase more then twice from 6,4 bn.$ to 13,8 bn.$ (Δ+117%).  Sale increase was mostly influenced iPhone sale income increase from 16,2 bn.$ to 37,0 bn.$  (Δ+128%). By geography most increase in saled was driven by American market from 9,2 bn.$ to 17,7 bn.$ (Δ+73%). iPhone cant be treated as “money cow” rather then “rising star” from Boston matrix which leads to profit increase like is fixed at Q4. Next potential “rising star” is mostly iPad which sales are also increased sharply by 111% from 7,3 bn.$ to 15,4 bn.$, other major companies products iPod and Mac are mostly ”old dogs” that will have to be ridden in the future. In general companies results are positive.

Balance sheet stays strong. Equity level sticks to 65%. Liquidity ratio is also good 1,6. Company manages to generate positive cash flow from working capital. Account Payable (29,7 bn.$) even got higher then Inventory and account receivables since Y2011 (1,2+18,4 bn.$), this Net working investment surplus almost almost unlimited companies growth. Account payable turnover is quit high and reach ~4 months, but taking into consideration good equity base there is no threat of company becoming insolvent.

Whats is the most worried thing is that companies generated cash flow is used for financial investments. Alone at Y2011 financial investments grew by 39 bn.$ that’s more then total 35 bn.$ Net Income before Depreciation that company generated at that year.

Investments grew from 49 bn.$ to 87 bn.$  (Δ+78%) or 63% of total companies asset 139 bn.$. Around half of there funds are used for US  Treasury securities and  agency securities ~35 bn.$ and other half is Corporate securities ~39 bn.$. That kind of fund usage is not effective, as investments into asset that generates companies income reach only 41 bn.$ or only 29% of total companies asset. Of course it is always nice to have reserves, but whey they extend working companies asset by few times, that is clearly to much. Some of there funds must be paid in dividend for sure or used in companies expansion into other sectors. Also there is an option that company is gathering funds for one of their competitors acquisition. In general companies balance structure is strong.

ROA (return on asset) and ROE (return on equity) also jumped at Q4 due to good results. ROE reached almost 58% which is very good, but if company will continue to stock surplus funds at investments into US and other companies bonds this figure will definitively decrease.

Share value:

Common Stocks 14,0 bn.$  0,931 bn. 15,0 $
+ Retained earnings 75,7 bn.$ + 81,3 $ 96,3 $
+ 1 year Net income before Depreciation 35,2 bn.$ + 37,8 $ 134,1 $


Companies share financial value is ~96$  curent market price is 544$ which shows that market is paying 448$ more or 11,8 years of Net income before Depreciation earnings. Share profitability (share market price/Net income before Depreciation) is 7%.

Companies did not paid any dividends till now and stocked funds, but market analyst predicts that this will the the year when it will start doing so, and numbers show that that is very likely. Some predicts a symbolic 8$/share dividend policy, while others larger onetime payment. We predict that it should be somewhere at the middle around 12$/share before tax or 2,2% investment yield. But as mentioned companies dividend policy till now was not to pay them.

Analysis source: Apple 2011 4Q 10-Q financial statments

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3 Responses to Apple 2011 4Q financial analysis

  1. Nice job ;)

  2. Please feel free to post comments.

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