2 Charts Show How Apple Has Become A Money-Making Machine

Daniel Martins

We all know that Apple has been very successful financially.

Within the 500 names in the S&P 500 index, Apple has produced more net income in the past year than the bottom 300 companies combined. It is also the most liquid of its cash-rich FAAMG peers Facebook, Amazon, Microsoft and Alphabet – by a wide margin.

Apple leads FAAMG on profitability

I have recently come across some data that startled me.

Apple’s return on equity is a whopping 73%. This means that the Cupertino company’s net earnings per year have been the equivalent of about three-fourths its book value of equity. The rate is substantially better than the 23% that the other Big Tech companies have been able to produce, on average.

Perfect-storm conditions

The following chart helps to explain Apple’s evolution into one of the most profitable companies in the world.

Right before Tim Cook assumed as CEO, in 2011, Apple’s ROE stood at a still respectable but much more modest 25%. The success of the iPhone, launched in 2007, and the brand-new iPad helped to push revenues and net income higher (see green line below).

Shortly thereafter, Apple began to return cash to shareholders more aggressively. The company reinstated its dividend in 2012 and bought back its own stock. Total shares outstanding dropped by about a third. Not only did Apple use its cash on hand to finance the repurchases, it took advantage of its fortress balance sheet to lever up and boost its capital distribution program.

Notice the yellow line below, representing shares outstanding, and how it began to decline fast in 2013.

The combination of higher earnings from Apple’s popular devices and fast-declining equity created perfect-storm conditions. The company’s ROE increased consistently, as the blue line above depicts, surpassing 70% in 2020. No other company in the broad S&P 500 group has come even close to these levels.

Explore more data and graphs

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