Corporate Valuation, Capital Structure, and Dividend Policy - Book Report/Review Example

Company Analysis Corporate Valuation, Capital Structure and Dividend Policy CompanyAnalysis Corporate Valuation, Capital Structure and Dividend Policy Apply Inc. (Apple) was incorporated on January 3, 1977 and is famous for designing, manufacturing and marketing of media devices, personal computers, mobile communications and portable digital music players. They are also responsible for selling a variety of related soft ware’s, peripherals, networking solutions and third party digital content and applications. The product and services of the company include iphone, Mac, Apple TV, Pad and IPod. They have a portfolio of professional and consumer software applications which include OS X and iOS operating systems ,I cloud and also a variety of accessory, support offerings and services. The company also sells and delivers digital content and applications through the I Tune Store, App Stores SM, I Bookstore SM and also Mac Apple Store. The company sells its products worldwide through its retail stores, direct sales force and online stores. They also have third party cellular network carriers, value added resellers and retailers. During February 2012, the company was able to acquire app search engine Chomp and during March 2013 they were able to acquire Silicon Valley startup, Wifi Slam which helps in the making of mapping applications in the smart phones. The primary products of the company include I pad, Mac, iPod, I Phone, iTunes, Mac App store along with Application software, I cloud operating system software and other application soft ware’s. I phone is basically made with a combination of an Internet communications device, an iPod, mobile phone in a single handheld product. It is based on the company’s Multi-Touch user interface and I phone features desktop class email, searching and maps and Web browsing. It is compatible with Mac and also Windows based computers. I phone would basically itself sync content from users’ u Tunes libraries along with bookmarks, email accounts and also contacts. I phone would allow customers to have an access to the I Tunes store and to download video files along with audio files and a variety of other digital content along with applications. During September 2012 the company was successfully able to launch I phone 5 which was the latest version of I phone. In addition to this the company was able to start with I phone accessories, third party compatible accessories which are available through the Company’s online and also retail stores from third parties. I pad which is another product of Apple is a multipurpose mobile device which is used for browsing the web along with sending and reading emails. It also helps in viewing photos, watching videos, listening to music, playing games and many other features. The product is based on company’s multi touch technology and it allows the customers to connect to their applications along with content in a very interactive way. I Pad also allow the customers to have an easy access to the I Tunes store so that they can download audio along with video files. They also have a variety of other digital content and also applications. During March 2012 the company was successfully able to launch I Pad in their third generation I Pad and the fourth generation I Pad and also I Pad mini was launched in October 2012. It was launched through the Company’s online and also retail stores from the third parties. Apple offers a range of personal computing products as well from portable computers to desktop. Related peripherals to devices and also third party hardware products. Mac desktop and also portable systems of the company and their features Intel microprocessors along with the OS X operating system are important products of Apple. They also have a wide variety of websites, DVDs, movies, management of digital photography and I life suite of software for creation. The desktop of the company include Mac mini, Mac Pro and also I Mac. The portable computers of the company include Mac Book Air, Mac Book Pro and also I Pod. The I pod line of the company have a portable digital music and media players which include I Pod nano, I Pod touch, I Pod shuffle and also I Pod classic. All these I Pods work with I Tunes and in addition to this the Company basically owns the third party I pod which has compatible accessories and I pod accessories which are available through the company’s online and also retail stores along with third parties. I Pod touch which was launched by Apple is based on the IOS and it has a flash memory which is based on the iPod with a widescreen Retina display and also Multi Touch user interface which is built within I Sight camera. The I pod touch basically allows the customers to have an easy access to the I Tunes store so that they can download video and also audio content as well as a variety of the digital applications. I Pod nano is an I pod with flash memory base and it has features of the company’s multi touch interface which allows the customers to navigate their music collection along with swiping and taping the display and also built in blue tooth which was for wireless listening. On the other hand I pod shuffle is used for flash memory based I pod that has a clickable control pad which is used for controlling music playback and also has a drive based portable music and also video player. The app store and I Book store of the ITunes are used here. The Mac App store basically allows the customers to download, install and discover applications. The store offers application in games, graphics, design, lifestyle productivity, utilities and also education. The company’s OS X operating system software along with other application software titles are also available on the Mac App Store. I Cloud is the company’s cloud system which helps in storing applications, photos, music, contacts, documents and also wirelessly pushing them to the multiple I OS devices. There is Mac and also Windows based computers. These I clouds features basically include I Tunes in the photo stream, Cloud, Documents in the Clouds Contacts, Mail, automatic downloads and also purchase history for the applications and also iBook and I Clouds backup. Users should sign up for free access to the I clouds where they are using device running qualifying versions of IOS and also IOX. The company basically offers a wide range of software products for consumers and also for SMB, enterprise, government and also education including the Company’s IOS and also OSX operating system software. IOS is the company’s mobile operating system that helps in serving the foundation for iOS devices and also for supporting ICLOUDS. It includes the features like notification center which is a way to manage and also view notifications in one place. I message on the other hand is the messaging service that allows the users to send text messages along with videos and photos between the IOS devices and also maps for navigations. IOS supports Siri which is a voice for activating intelligent assistant and it is also available for qualifying iOS devices. The Mac operating system is basically built on an open source with a UNIX based foundation. There are application soft ware like iLife where the company’s consumer oriented digital lifestyle application is used to suite including the Mac computers and they have features like I Photo, I Movie and also I Digital. The company helps in selling various other application soft ware’s including Final Cut Pro, Logic Pro and its FileMaker Pro database software. The company helps in manufacturing the Apple LED cinema display and also the thunderbolt displays. The company sells a range of apple branded and third party Mac compatible. There are about 917 million Apple shares available for trading. Individuals and institutions which can hold blocks of these shares so it is not known for exactly the number of shareholders there are. Apple Incorporation faces opportunities along with risks especially during the I Phone expansion. The expansion of the I Phone product line to both lower price points along with having larger screen sizes which has become a running conversation around shares of Apple Inc. The investors try to assess the health of what are the company’s most profitable and also important business lines. There was a pair of broker which picked up that conversation with mix of data. The Bank of America and Merrill lynch issues a lengthy report on why Apple AAPL, with -0.07 % which should basically launch a lower cost I Phone and also there is growth in the smart phone market which is likely to take place over next few years. Jefferies and Co also said that the company is most likely to launch a device in the summer and also there is much rumored larger screen. I Phone is unlikely until the next year which has technical challenges. I Phone accounted for almost 53 % of Apple’s total reported revenue for the 2012 calendar year and analysts believe it contributes to a very large percentage of the company’s earnings. On an emerging markets with low prices and budget conscious consumers, people believes Apple could expand its total addressable market by about 55 percent of a device and there is also ongoing international expansion. Company can maintain a 35 percent gross margin on such a device that is built on a final price tag of about $250 to $300 in mind. I Phone 5 help in selling more than $600 if the subsidies which are paid by the carriers of Apple are taken into consideration. Peter Misek of Jefferies and Co believed that Apple is planning to launch such a device along with the I Phone 5, which has features of the same design as the iPhone 5 with an improved chip. By 2014 4.8 inches screen will come out due to the manufacturing issues. There is an expansion expected of I phone 6 which could pressure margins for Apple, which has more expensive components and also display. This can improve profits from an I phone 5 S which has expected features of the same factor as the 5. Apple is basically concerned about the slow demand and also margin pressure. They maintained hold rating on the stock. Apple 2012 results are extremely impressive and their revenue has jumped from $ 24. 7 billion to $ 39.2 billion or by 59 % compared to 2011. High revenues basically increase which lead to even more rapid Net Income before increase in depreciation. This increased from 6.3 billion to $ 12.4 billion or almost dubbed. This basically lead by slower revenue cost which was + 43 % and also operating cost increase which was +36 % then the revenue. i Sales of the companies by geography was good of Apple with 1/3 rd of the sales coming from US and 1/3 coming from Asia. These are the regions with highest estimated growth. Sales in Europe are about 22 % and sales in Asia have doubled in comparison to 2011 so this is the market with highest amount of growth. Revenue of the company has been gathered mostly by I Phone with 58 % increase in sales and also 85 %. Major rise was in I pas with revenue increasing by + 132 % and recently they have about 17 % of company’s income which has a definite income growth along with segmentations while products of the past are Mac and also I pod. There has been an increase in the share of Apple in tabled marked and also mobile from 48 % to about 60 %. This is better compared to its competitors Google android, which basically increased from 15 percent to 19 percent. There is a big battle which is projected in the future especially between Apple and Google. The results over all are positive. Balance Sheet of Apple was extremely strong. The equity level has increased basically to 68%. This did not have a high return and impact on equity level which is 45 percent. Since company announced their dividend payments and them also share repurchases companies Equity which should not increase in the future. Liquidity ratio of Apple is 1. 6 which is good. Company has cash surplus of $110 billion which has increased from $ 97 billion. Company’s inventory and also account receivables are extremely minimal so as liabilities. Balance Sheet stayed the same. Over all the balance Sheet of the company was extremely strong. Share value: Companies share basic value was ~109$ (Δ+13,5%/96$ compared with Q4).  Current market price is ~610$ (Δ+12,1%/544). These results basically show that market is paying ~500$ more or 11. There was 4 years of Net income before depreciation earnings. The companies show that companies’ shares are a bit over evaluated. If calculating Net income before depreciation according to last quarter yearly earnings which should be around 52 bn.$/year (13 bn./quarter) or 55,6 $/share which makes it~9 year. The indicator level is extremely high. Share profitability (Share market price/Net income before Depreciation). If calculated the projected income (52 bn. $/year) is 9. 1% which is a bit over average. Company basically announced that it will pay $ 265 per share with quarter dividend at ~1,7% dividend yield. This is a bit low which is due to high share price. From the year 2008 to 2012 the trading of apple increased from 50 times earning to 10. Apple is known to be a “bubble ready to burst” by a succinct commentary by Leonid Kanopka. The price to earnings ratio is basically the simplest way to gauge how the market would really value a company. Apple has a high P/E which is likely to be 50 times earnings investors were happily ready to pay for Apple. It is also a signal that the market would hope for in order to get high hopes for a company and a low P/E like the current situation of apple shows which 10.05 forward earnings ratio is. This basically shows no confidence. There are many sophisticated ways to value a company. The P/E chart of apple trading is basically in a band between 35 and 45 times earnings which were between 2006 and most of them were in between 15 and 25 times earnings since 2008. As per the latest information the price of Apple has dropped outside the current band and it happened due to the great recession. As per the latest information it is about 15 xE today which shows that a new band is about to be formed. Apple as per the latest report is the most undervalued large cap stock which is on S$P 500. As per the latest dividend information the declaration date of the latest dividend policy was 01/23/2012 and the dividend amount paid was about $2650 in the cash format. The rate of the dividend was about 10.60 with current dividend yield being 2.5 DIVIDEND INFO Dividend Declared Date 01/23/2013 Dividend Ex-Date 02/06/2013 Dividend Record Date 02/10/2013 Dividend Pay Date 02/13/2013 Dividend Amount 2650 Type of Payment Cash Payment Dividend Rate 10.60 Current Dividend Yield 2.5 5-Y Average Dividend Yield 0.0 Payout Ratio 6.0 5-Y Average Payout Ratio 1.0 The growth rate trend of Apple has been very fluctuating during the year 2013 where the revenue as per the 5 year growth of $ 43.66 billion with the income being $ 59.60 billion. GROWTH RATES 5-Year Growh R² of 5-Year Growth 3-Year Growth Revenue 43.66 97.7 44.91 Income 59.60 97.6 54.83 Dividend 0.00 0.0 0.00 Capital Spending 64.18 NA 107.07 R&D 31.88 NA 33.46 Normalized Inc. 59.21 NA 54.46 An important factor is how apple basically plans to leverage Intel’s foundry. Tim Cook’s strategy was basically uncoupled from Samsung as a supplier of LCD with memory and also processors while simultaneously creating a worldwide supply chain basically from the remnants of former leaders like Elpida, Toshiba, Sharp and also Intel which is extremely remarkable with the scope and breadth. By 2013 Apple should have placed a supply chain from 500 M IOS devices like iPads, iTvs, ipods and also iPhones. In the near term it is important to see the relationship which is with TSMC and it also spells not just freedom but also a vertical operation independent from their number 1 competitors. Apple needs to make sure that they are lower in cost which has an inconceivable thought which is for most of the observers. The major forecasting is linked with Tim Cook which talks about building addordable iphone and also $250 iPad Minis which are for the other half of the world and which is currently unaddressed today. BIBLIOGRAPHY "Apple." Apple. http://www.apple.com/ (accessed April 14, 2013). "Apple 2012 1Q financial analysis | Financial analysis." Financial analysis - Worlds largest companies overlooks and other useful stuff. http://www.finanalys.com/apple-2012-1q-financial-analysis/ (accessed April 14, 2013). "Apple Inc. - Annual Report." Apple Inc. - Overview. http://investor.apple.com/secfiling.cfm?filingID=1193125-12-444068 (accessed April 14, 2013). "Apple divident policy." Manual ideas. http://www.manualofideas.com/members/q/q20091215.pdf (accessed April 14, 2013). 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Fortune Tech: Technology blogs, news and analysis from Fortune Magazine . http://tech.fortune.cnn.com/2011/12/02/about-apples-incredible-shrinking-pe-ratio/ (accessed April 14, 2013). Owens, Jeremy C.. "Biz Break: Apple stock falls after shareholders meeting, but rest of Wall Street shoots higher - San Jose Mercury News." Home - San Jose Mercury News. http://www.mercurynews.com/60-second-business-break/ci_22682508/biz-break-apple-stock-falls-after-shareholders-meeting (accessed April 14, 2013). "SemiWiki - How Apple Plans to Leverage Intels Foundry." SemiWiki - The Front Page. http://www.semiwiki.com/forum/content/1862-how-apple-plans-leverage-intel-s-foundry.html (accessed April 14, 2013). Read More