Sorry, I have been slacking for a while. I am still getting back into the groove after the long break. As always, you can read this on my blog, or read it on Reddit.
Step 5 of 10: What is the company’s Revenue, Cash, and Debt?
Revenue can found in a lot of different places. If we go to Morningstar.com and search for the stock symbol AAPL you can see the last 10 year worth of total revenues under key ratios.
However, you can’t see the revenue breakdown in Morningstar. If you want to see the revenue breakdown by sectors within the company you have to go to the annual report. It is a bit tedious, but sometimes you can find some pretty interesting information.
In 2007, around the first release of their first iPhone, Apple made about $24,578 Million or $24.578 Billion. In 2016, Apple made a whopping $215,639M in revenue!! That is an annual revenue growth of 24%!!! That is crazy. However, in the last 5 years, they have only grown their revenue at 6% – 7% annually. A company can’t grow at 24% forever because that means the entire world will be owned by Apple.
If we look at the 10-k, Apple breaks down their revenue between iPhone sales, iPad sales, Mac sales, Service, and other products. We should look at how much each product represents how much of the company’s total revenue. This is important because just because we think a certain product is great and if that product only represents a small portion of their total revenue, then that product will not move the needle very much.
Apple also breaks down their revenue by country so you can take that data into consideration.
In 2016, Apple Revenue Split:
iPhone represents 63% of revenue
iPad represents 10% of revenue
Mac represents 11% of revenue
Service represents 11% of revenue
Other products represent 5% of revenue
Apple's Revenue (NYSE:AAPL) 2016 Total Revenue $215,639M
iPhone Sales $135,852M
iPhone as % of revenue 63%
iPad Sales $21,563M
iPad as % of revenue 10%
Service Sales $23,720M
Service Sales as % of revenue 11%
Other products $10,781M
Other products as % of revenue 5%
I did this for 2016, but you should do this for 5-10 years worth of data. Now, let’s look at how much cash this company has and how much debt they have. The reason for this is that during a downturn if the company has a lot of debt and no cash they may go default on their loans and potentially go bankrupt. It is harder for companies to go bankrupt if they have no debt.
At the end of 2016, Apple’s Cash & Cash Equivalent Position = $245 Billion At the end of 2016, Apple’s Debt Position = $83 Billion So at the end of 2016, Apple has a net cash of $245B – $83B = $162 Billion
Apple's Cash & Debt (NYSE: AAPL) 2016 Cash & Cash Equivalent $20,484M
Short-term assets $46,671M
Long-term assets $170,430M
Total Cash & Cash equivalents $237,585M
Short-Term Debt $0M
Long-Term Debt $78,927M
Total Debt $87,927M
Net Cash. Cash - Debt. $158,658M
You don’t have to find debt and cash load for the past 10 years since the amount of cash and debt usually only matters when you buy the company. For the most part, it is better companies to have a lot of cash and low debt. If you subtract debt from the cash/asset balance that should either be positive or have enough free cash flow to pay that back within 3 to 5 years. I don’t feel comfortable with buying a share of a company if they can’t pay off their debt within 3-5 years.
TL; DR
Find company’s total revenue and revenue break down for 10 years.
Find company’s total short-term & long-term debt.
Find company’s total cash or cash equivalents.
Find company’s net cash balance. Cash – Debt.
The company should be able to pay off their debt within 3 – 5 years. Any more than that will be a bit too much.
Submitted January 16, 2018 at 08:21PM by stock_market_noob http://ift.tt/2FMzqo7
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