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Shareholder Analysis

Shareholder Analysis

Apple Inc. is an electronic computer software developer and personal computer-producing company selected for use in this shareholder analysis. Accordingly, three aspects are discussed in this analysis. They include the economic conditions that influence the company’s performance, a comparison of the company’s market performance in 2017 to market conditions, and an analysis of year-over-year performance in 2016 and 2017. The discussion of these aspects is as follows:

Evaluation of Economic Conditions

Apple Inc. is a multinational company that operates in many countries. Thus, the company is exposed to diverse conditions that influence its performance across diverse markets. Economic factors are part of these aspects and form an important consideration for the company. Economic factors entail stable economies in developed countries, increasing disposable incomes among target customers, and rapid growth in developing countries. Essentially, these three factors act as an opportunity for the company, and therefore, they influence the company positively. An example of how the company positively influences is the assessment of the rapid economic growth rates of Asian countries (Lockamy III, 2017). The sales of Apple Inc. in these foreign countries increased as a result.

However, negative impacts on the company’s performance have originated from regulations existing in these markets. The company has faced legal challenges directed against its practices and policies. Notably, this has been the case in the United States, European Union, and Australia, where the company faces legal battles and strong criticism regarding its third-party repair services (Lockamy III, 2017). Another legal challenge that the company has faced in the recent past is the increased privacy regulations imposed by the government, which imposes costly regulatory compliance. The market conditions in most developed countries where the company operates are characterized by stable political conditions and free trade policies. Essentially, the company reaps from stable market conditions, and the introduction of free trade opportunities in the majority of economic policies gives the company an advantage in saving on costs. On the contrary, there have been significant trade disputes between the U.S. and China, which have reduced the company’s sales in China, a market deemed one of the strongest in the world.

Comparison of Apple Inc.’s Performance in 2017 To Market Conditions

Apple Inc. had a successful performance in 2017. The company was able to generate tens of billions of dollars. Further, the company attracted significant investment from investors, up to billions of dollars. The company’s performance in the year can be identified across three dimensions. First, the company created significant wealth for its shareholders. Notably, 49% of the company’s total returns in 2017 were delivered to investors in dividends. In addition, the company suffered its biggest loss in market value in 2017. As indicated by the company reports, the company lost $450 billion in market value, which pushed the company’s market valuation down by $700 billion, below that of its major competitor, Alphabet. The significant loss was occasioned by adverse market conditions brought by headwinds in China and longer upgrade cycles. As a result, the company made lower-than-expected sales of its major product, iPhones.

Another important performance that Apple Inc. exhibited in 2017 was the production of huge amounts of cash. Overall, the full-year revenue raised was $229 billion, representing a 6% increase from the following year. Notably, the cash element of current assets shows the huge cash amount shown in the company’s balance sheet. Compared to the market conditions, the raising of this cash was due to favorable market conditions in most countries where the company operates. An increase in Apple’s services business also characterized the company’s performance in 2017. The company intensified the sales of Apple Music, Apple Pay, iTunes, and the App Store (Chumnumpan & Shi, 2019). In comparison to the market conditions, the company successfully sold these products due to stable political and economic conditions. Stable economic conditions were characterized by low inflation rates in the United States and affordable interest rates for the general public.

Year-to-year Performance of Apple Inc. In 2017

Metric 2016 2017
Price-earnings ratio (P/E) 13.02 16.59
Price-to-book ratio 4.32 5.85
Return on assets (ROA) 14.31% 13.83%
Return on equity (ROE) 34.94% 37.37%

 

Apple Inc.’s price-earnings ratio increased from 13.02 in 2016 to 16.59 in 2019. Notably, the ratio indicates a company’s financial performance regarding market valuation. Thus, the company’s worthiness increased across the two years due to the increased dividend payout in 2017. Based on the price-to-book ratio, the company’s value for this metric increased from 4.32 to 5.85 across the two years. The increase observed indicates an improved financial performance for the existing investors. However, it may discourage a prospective investor from purchasing its stock.

The return on assets ratio decreased across the two years, implying that the company’s ability to use assets to raise profits was reduced. The observed decline can be associated with the significant decline in the company’s stock price that took place in 2017. However, the performance is still good because, in the industry, a ROA of between 5% and 20% is generally preferred (Myšková & Hájek, 2017). The final return on equity metric indicates increased financial performance across the two years. Notably, this ratio increased from 34.94% to 37.37%, which can be associated with net income concerning equity. The ratio is above 15%, which is the generally preferred value for the ratio, indicating an excellent performance in the two years.

 References

Chumnumpan, P., & Shi, X. (2019). Understanding new products’ market performance using Google Trends. Australasian Marketing Journal (AMJ)27(2), 91-103.

Lockamy III, A. (2017, July). An examination of external risk factors in Apple Inc.’s supply chain. In Supply Chain Forum: An International Journal (Vol. 18, No. 3, pp. 177-188). Taylor & Francis.

Myšková, R., & Hájek, P. (2017). Comprehensive assessment of firm financial performance using financial ratios and linguistic analysis of annual reports. Journal of International Studies, volume 10, issue: 4.

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Question 


Continue your work with the company you selected in Wk 2.

Research your company’s financial reports for 2017.

Complete a 2- to 3-page FAQ/Shareholder Analysis.

Evaluate economic conditions that influence company performance. Consider political, environmental, currency (money), global economics, and government influence on economic conditions.

Shareholder Analysis

Shareholder Analysis

Compare market conditions with the company’s performance for 2017. Conclude how the market conditions that year influenced the company’s performance, such as interest rates, Federal Reserve Bank monetary policy changes, or other market conditions relevant to the company you selected.

Analyze year-over-year performance from 2016 and 2017. Consider key metrics or ratios such as trailing PE ratio, forward PE ratio, price to book, return on assets, and return on equity in your conclusions.

Cite references to support your assignment.

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