Influencing Economic Conditions
Apple Inc. operates in a global market, so its performance is subject to various external influences. In the context of the fiscal year end of September 24, 2022, one can highlight the following.
Political Factors
Political factors have been reflected in the relative stability and government behavior in key markets, and trade agreements and regulations have a significant impact. Nevertheless, the period was complicated by rising geopolitical tensions worldwide. Meanwhile, intellectual property protection and tax regulations impacted the company’s net income.
The government played a paramount role in shaping Apple’s financial performance, as the change in corporate tax rates could affect the company’s effective rate and profits.
Environmental Factors
Environmental factors may be considered more prominent than before, and Apple’s commitment to reducing its impact and diversifying its operations has a positive impact on its reputation but increased costs.
In terms of currency and the global economy, the company has faced challenges due to the global economic recession and tensions in the system. However, the strength of the home currency, the dollar, has made the company’s products more expensive for international customers.
Market Conditions and Company Performance
The performance during the period under review was likewise affected by the mentioned changes in interest rates due to changes in the Federal Reserve’s monetary policy. The company realized a benefit with critical interest rates remaining near zero (The Apple Maven, 2021). Moreover, this low-interest-rate environment allowed Apple to access funds at a lower cost. In addition, the market’s reaction to the ongoing economic processes was noticeable, which was also a positive factor for the corporation.
Investors reacted positively to the ongoing Federal Reserve policy, highlighting a helpful trend in the stock’s reaction (Klebnikov, 2020). An appropriate overall strategy while revising inflation expectations and promoting economic growth pushed the market to rebound. In this format, Apple could seize the opportunity to increase its holdings while maintaining a standard ratio on increased liabilities.
Year-Over-Year Performance Analysis
Trailing PE Ratio
This ratio looks at the proportion of market price per share to gains per share, and assuming an average fluctuating price of $150 for 2022, the ratio is approximately 18.8 (Apple, 2022b). Accordingly, there is a positive trend with increased earnings and an average lower stock price in 2021. As the trailing ratio increased, investors were willing to pay a higher ratio for every dollar of earnings in the new period.
Forward PE Ratio
Forward PE Ratio involves accounting for future earnings, which are challenging to forecast under current circumstances (Zhang, 2019). Nevertheless, without a detailed calculation, we can assume stable growth, which is supported by the current trend in the 2021-2022 data.
Price to Book Ratio
Based on the data provided and the assumed median market price per share of $150, the price-to-book ratio for Apple Inc. in 2022 is approximately 0.446 (Apple, 2022b). This is up from an estimated 0.311 in 2021 when the stock price was even lower (Apple, 2022b). Thus, investors were more confident about the corporation’s growth prospects in 2022 because they were willing to pay a higher premium.
Return on Assets
Return on assets – the balance of net income to total assets, i.e., for 2022, $99,803 million / $353,755 million = 28.22%, and 2021 it is approximately 26.97% (Apple, 2022a). The comparison’s conclusion highlights that in 2022, the company has a higher percentage of profit compared to total assets.
Return on Equity
The exact ratio of net income to total shareholders’ equity shows an increase of more than 47%: $99,803 million / $50,672 million = 197.39% in 2022 compared to 150.28% in 2021(Apple, 2022a). Thus, the return on equity has significantly increased, which is a positive indicator and, along with the others, allows us to observe an overall improvement in efficiency.
References
Apple. (2022a). Apple releases fourth-quarter results. AppleInc. Web.
Apple. (2022b). Stock price. Apple Inc. Web.
Klebnikov, S. (2020). Federal reserve says it will keep interest rates near zero until 2023. Forbes. Web.
The Apple Maven [@AppleMaven]. (2021). The Federal Reserve announcement to keep short-term loan interests near zero [Tweet]. Twitter. Web.
Zhang, Z. (2019). Investment decision based on value factor and financial criteria—taking apple inc. As analysis sample. Proceedings of the 2019 International Conference on Economic Management and Cultural Industry (ICEMCI 2019). Web.