LESSON #4 Case Studies Ying Li International American University FIN 500: Financial Management Stephen Young March 23, 18 Stock Valuation and Analysis of Apple Inc. Investing in stocks has always been attractive to investors because it offers higher returns in a shorter time than traditional investments. But as yields increase, so does the risk of investing in stocks. Some important factors to predict the stock price are price-earnings ratio, beta value, market value, dividend yield and so on (Brigham & Ehrhardt, 2011). Apple Inc., a leading California-based company that leads the technology industry, is a pioneer in telecommunications, producing and selling consumer electronics, computer software and online services. Apple Inc. …show more content…
Stock prices fluctuate. A price-earnings ratio is a measure of the relationship between the price of a company's shares and the earnings per share issued. The price-earnings ratio indicates that shareholders are willing to pay for every dollar of earnings (AAPL, 2017). In the past five years, the Apple’s stock price rose sharply in 2013. The stock trading price of $55, the current trading price of $140, which showed substantial growth in the stock, investors in less than 4 years increased by nearly 3 times the wealth. The company also regularly publish quarterly dividend quarterly regularly, dividend yield of the company is 1.61% (AAPL, 2017). The Market cap is the value of all outstanding shares in the company. It provides information about the value of the stock. People think that the higher the stock price, the bigger the company, and the bigger it is. But this is a common misconception. Stock price is the real value of the company. Market value includes all shares of the company and determines a value based on the same price (Brigham & Ehrhardt, …show more content…
This is the degree to which stocks are unpredictable in the market. This is a common risk presentation that should help analyze stock movements. The Beta coefficient of the more volatile stocks will be greater than 1, while that of the less volatile stocks will be less than 1(Brigham & Ehrhardt, 2011). Apple's stock is one of the most sought after investments, given the continued growth of the various stocks in the market and the telecommunications industry. Its financial position is good, and its revenues and net income are growing. This makes it a perfect choice for investment. Its beta coefficient is 1.45, which is higher than the market's beta 1, and indicates that the stock is priced very high. Compared with many other competitors, the company faces less risk and certainty. It has a diversified product division that helps not only increase the customer base but also expand the market (Apple,