Research Paper Undergraduate 1,940 words

Apple Inc. Stock Analysis: Financial Research Report

~10 min read 6 sections Finance · Financial Analysis

Abstract

This financial research report evaluates Apple Inc. as a recommended stock investment for a specific client. The paper begins by profiling the client — a 32-year-old entrepreneur with a high risk appetite — and then provides an overview of Apple's history, products, and financial performance. A five-ratio analysis covering current ratio, debt-to-equity, return on assets, return on equity, and earnings per share is conducted across three fiscal years (2018–2020). The report then identifies macroeconomic, firm-specific, and client-level risks, offering practical mitigation strategies including portfolio diversification, preferred stock ownership, and disability insurance. The paper concludes with a formal recommendation supported by Apple's consistent profitability growth, rising EPS, and continued innovation leadership.

Key Takeaways

Introduction: Key factors for evaluating investment in Apple
Rationale for Stock Selection: Apple's history, products, and financial overview
Client Profile: Client demographics, goals, and risk appetite
Ratio Analysis: Five-ratio analysis across three fiscal years
Risk Reduction Recommendations: Macro, firm, and client risk mitigation strategies
Recommendation of Stock to the Client: Final investment recommendation with supporting rationale

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What makes this paper effective

The paper grounds its investment recommendation in quantitative evidence, presenting five ratios across three fiscal years in a clear table and then interpreting each one individually, giving readers both data and analysis.
The client profile section personalizes the recommendation, demonstrating that investment advice is not one-size-fits-all — the client's age, profession, risk appetite, and portfolio status all directly inform the stock and instrument selected.
The risk section addresses three distinct levels (macroeconomic, firm-specific, and client-personal), and pairs each risk with a concrete mitigation strategy, showing practical financial planning rather than abstract theory.

Key academic technique demonstrated

The paper effectively uses ratio analysis as a structured analytical framework, moving systematically from liquidity (current ratio) to leverage (debt-to-equity) to profitability (ROA, ROE, EPS). Each ratio is defined, contextualized with supporting citations, and then applied specifically to Apple's three-year trend data — demonstrating how academic financial tools translate into real investment decisions.

Structure breakdown

The report follows a six-section professional structure: introduction establishing the evaluative criteria, company background and rationale, client profile, quantitative ratio analysis, risk identification and mitigation, and a final recommendation synthesizing all prior sections. This mirrors a real-world financial advisory report format, making it a strong model for applied finance writing at the undergraduate level.

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Essay 1,940 words

Introduction

There are several factors that one ought to take into consideration before investing in a firm. These factors include, but are not limited to, the enterprise's performance, the caliber of the management in place, the financial condition of the company, and the future prospects of the business. However, it is essential to note that one key factor that could be overlooked — despite its relevance — is the profile of the client seeking to invest. This is an incredibly important consideration given that each client has a different temperament and different investment objectives (e.g., protecting savings from inflation, growing wealth, etc.). As a financial manager whose key functions include researching investments for clients, this report highlights the rationale for selecting Apple Inc. as the stock of choice and explains why preferred stock is a suitable investment alternative for the client in question.

Rationale for Stock Selection

Apple Inc. is one of the world's leading technology companies. Below is an overview of the company.

The company was founded on April 1, 1976, by two budding entrepreneurs who elected to drop out of college at the time and pursue their dream (Terrell, 2008). At present, the company maintains its headquarters in Cupertino, California.

The company offers a wide range of products and services. Among the hardware devices that Apple manufactures and markets are mobile communication devices (such as the iPhone), tablets, computers, and assorted accessories and wearables. The company also provides various services to its diverse clientele, including digital applications and content as well as networking solutions.

Apple's profitability has grown immensely since its inception. In its latest financial statements, the company reported a net income of $55 billion (Apple Inc., 2020). This represented a profit growth of 14% over three years, up from $48 billion in 2017. As Brigham and Houston (2020) point out, profit is the most important motivating factor in any economic undertaking. By growing its earnings consistently, Apple appears committed to securing the wellbeing of its stockholders.

Client Profile

The client was referred by a mutual friend. As a financial manager, one of my key objectives is ensuring that the investments I select for clients suit their individual needs and expectations. As Higgins (2018) observes, "client profiles are instrumental in efforts to determine how comfortable clients will be with the outcome of a particular decision." The client's profile is summarized below.

Age: 32 years old. Marital Status: Married. Profession: Entrepreneur. The client operates a car rental business in New York City that has been in operation for seven years. He is also in the process of establishing an online clothing store.

The client is keen on growing his wealth and has a high appetite for risk. It should be noted that in any investment or portfolio, two of the critical factors that must be considered are risk and return (Keown, Martin, and Titman, 2017). While the client desires a high return, the current stock was selected in order to ensure a balance between the possible return and the potential risk.

The client does not currently own stock in any other company, making this his first equity investment.

Ratio Analysis

In assessing the financial health of Apple, it is prudent to conduct a ratio analysis. The ratios highlighted in this section serve as useful indicators of both the financial situation of Apple and its performance over time. A total of five ratios are examined across the last three fiscal years, as presented in Table 1 below.

Table 1: Apple Inc. Key Financial Ratios, 2018–2020

The current ratio is a liquidity ratio that indicates how capable Apple is of settling its short-term obligations. Over each of the three years examined, Apple maintained a current ratio above 1, indicating that its short-term assets (such as cash) exceed its short-term debts (those due within a year or less). As a general rule, a higher current ratio is preferable because it signals that the enterprise could meet its near-term obligations even if they fell due suddenly. Based on this analysis, Apple would not have difficulty satisfying its short-term liabilities.

This financial leverage ratio helps assess Apple's long-term solvency. As Porter and Norton (2016) observe, it "more specifically reflects the ability of shareholder equity to cover all outstanding debts in the event of a business downturn" (p. 119). A high ratio is largely synonymous with increased risk. Over the three years under consideration, Apple's debt-to-equity ratio has risen consistently, which indicates that the company has been aggressively using debt to finance its growth. While this approach may generate greater future earnings, it could also negatively affect performance during an economic downturn — given the associated cost of debt — and in turn affect both profitability and stock price.

According to Bierman and Smidt (2003), return on assets is one of the most important ratios for assessing how effectively an enterprise utilizes its assets to generate profits. Apple's return on assets has followed an upward trend over the three-year period. As of its latest financial statements, the figure stood at 17.73% — a 1.45 percentage point increase over three years. This indicates that Apple's management has grown more efficient in deploying the company's assets. If this trend continues, Apple's profitability relative to its total asset base is likely to improve further.

Return on equity is "a measure of the profitability of a corporation in relation to stockholders' equity" (Porter and Norton, 2016, p. 78). This ratio is particularly instructive for any investor because it demonstrates how effectively shareholder funds are being deployed to generate returns. Over the three-year period, Apple's return on equity has risen substantially — from 55.56% in 2018 to 87.87% in 2020. If this trend is sustained, investors who purchase shares now are likely to see growing returns in the coming years.

Earnings per share (EPS) represents the amount of profit an enterprise generates for each outstanding share of its stock. Apple's EPS has increased over the three-year period, meaning the company today generates more earnings per share than it did three years ago. According to Bierman and Smidt (2003), while there is no definitive causal correlation, a higher EPS frequently has a positive influence on stock price. Therefore, if Apple's EPS continues its upward trend, investors who buy now are likely to benefit from higher stock prices in the future.

2 Sections Hidden · 590 words

Risk Reduction Recommendations370 words

Macroeconomic risks are those that emanate from outside the firm. At present, the nation — and indeed the world — is…

Recommendation of Stock to the Client220 words

In my opinion, Apple is an ideal stock for this client to invest in. This recommendation is grounded in several reasons. First, the company continues…

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References

Apple Inc. (2020). Investor updates. https://investor.apple.com/investor-relations/default.aspx

Associated Press. (2020). Apple CEO Tim Cook's successor may also have big shoes to fill as Steve Jobs' protégé builds distinct legacy. Financial Express.

Bauer, L., Broady, K. E., Edelberg, W., & O'Donnell, J. (2020). Ten facts about COVID-19 and the U.S. economy. Brookings. https://www.brookings.edu/research/ten-facts-about-covid-19-and-the-u-s-economy/

Bierman, H., & Smidt, S. (2003). Financial management for decision making. Beard Books.

Brigham, E. F., & Houston, J. F. (2020). Fundamentals of financial management (14th ed.). Cengage Learning.

Higgins, R. C. (2018). Analysis for financial management (12th ed.). McGraw-Hill Education.

Islam, R., Khan, T. R., Choudhury, T. T., & Adnan, A. M. (2012). How earning per share (EPS) affects share price and firm value. European Journal of Business and Management, 6(17), 97–108.

Keown, A. J., Martin, J. D., & Titman, S. (2017). Financial management: Principles and applications (13th ed.). Pearson.

Montgomerie, J., & Roscoe, S. (2013). Owning the consumer — Getting to the core of the Apple business model. Accounting Forum, 37(4), 290–299.

Porter, G. A., & Norton, C. L. (2016). Financial accounting: The impact on decision makers (10th ed.). Cengage Learning.

Terrell, E. (2008). Apple Computer, Inc. Library of Congress. https://www.loc.gov/rr/business/businesshistory/April/apple.html

Key Concepts in This Paper

Ratio Analysis Preferred Stock Client Profile Earnings Per Share Return on Equity Debt-to-Equity Portfolio Diversification Macroeconomic Risk Return on Assets Apple Inc.