1. TO: Christopher Thacker, Managing Partner
Towson Cornerstone Group
FROM: Jacob Mitchell, Junior Analyst
Towson Cornerstone Group
DATE: September 12, 2016
SUBJECT: Apple is in Great Financial Standing
As requested, I have conducted a comparative financial analysis between Apple
and its top competitor. The results show Apple currently in a great financial
position. In order to make this conclusion, I first, determined that Microsoft is
Apple's top competitor. Then, I took a set of five indices and compared each
company to industry standards. I found that Apple is doing notably well in the
areas of net income growth and earnings per share.
Five Indices Show Apple Ahead
Apple looks great in comparison when looking at all five indices. Table 1 shows
each standard and the companies current condition.
Index Standard Apple Microsoft
NET INCOME Percent Growth 27.94% -(23.17%)
EPS Industry Average: $5.71 $8.56 $2.05
P/E RATIO Industry Average: 20.36 12.85 28.10
QUICK RATIO Greater than 1 1.08 2.31
STOCK PRICE Target: AAPL$120 MSFT$61 intra $107.70
6mo $100.63
1yr $104.31
$57.61
$52.63
$54.99
NOTE: Data regarding industry standards was obtained from NASDAQ.com, the
largest stock exchange association in the world (NASDAQ,2016a, p1) (NASDAQ,
2016b, p.1).
Apple has high net income growth. Table 1 shows that Apple's net income
growth rate us 27.94%, which exceeds the standard (NASDAQ, 2016a, p.1).
Apple's net income for Q3 9 months ended is $36.67BIL ("Apple Reports...",
2016). Microsoft is experiencing regression in their net income, with numbers
going down 23.17% (NASDAQ, 2016b, p.1). This is the result of the new CEO,
Tim Cook, who has boosted revenues 101% since taking over in 2011 (Graham,
2016, para 4).
Apple has high EPS. Table 1 shows that Apples earnings per share is $8.56,
which exceeds the standard (NASDAQ, 2016a, p.1). This means that the company
is currently very profitable to investors. Apple's EPS is four times higher than
Microsoft, who has an EPS of only 2.05 which falls well below industry standards
(NASDAQ, 2016b, p.1). This is most likely due to the increase in use of Apple
products by mainstream consumers (Rogers, 2016, para 2)
BCE MEMORANDUM

2. Apple has a good P/E. Apple's price to earnings ratio is 12.85 (NASDAQ,
2016a, p.1). The P/E ratio for Apple is much lower than both Microsoft and the
Industry Average. This makes Apple an attractive stock because a lower P/E
shows better performance (Frenette, 2016, para 2). In contrast, Microsoft's P/E is
more than double than Apple's and is higher than the industry average. This could
be due to the fact that Microsoft was more popular in the 90's and Apple is more
popular now.
Both companies have good quick ratio. Apples quick ratio is only 1.08,
which exceeds that standard of 1 (NASDAQ, 2016a, p.1). It is possible that
Apple's quick ratio is low due to the fact that they are releasing a new product this
quarter, which require much research and development (Rogers, 2016, para 4). The
quick ratios show that both companies are able to liquidate their assets and come
away with a profit. This is due to the fact that the ratio is greater than one so both
companies are in good standing ("Quick Ratio", 2016).
Both companies fall short with stock price. The stock prices for both
companies are coming up short of their targets. Apple is seeing a slow in revenue
growth; for example, this past year was the first time in 13 years that total revenue
fell below the consensus projection (Rogers, 2016, para 4). This could be due to
the fact that they did not release a new iPhone model in the past year, which is
their top seller.
Two Very Similar Companies
The Microsoft was chosen due to the fact that each company sells products in the
technology industry. Comparable products include computers, laptops, operating
systems, word processors, various software, "cloud" storage, cell phones, and other
electronic devices.
Let's Discuss Apple's Great Financial Standing
After looking into all five indices and comparing them to Apple's top competitor, it
is clear that they are doing very well financially. If you have any questions please
do not hesitate to call me at (443) 243-4553 or email me at
jmitch22@students.towson.edu. I look forward to hearing back from you and
discussing Apple's impressive financial position.
References

3. Apple Reports Third Quarter Results. (2016, July 26). Retrieved from
http://www.apple.com/newsroom/2016/07/apple-reports-third-
quarter-results.html
Frenette, J. (2016, August 18). Why Apple, Inc. IPhone Growth Will Pick
Up Again? Retrieved September 12, 2016, from
http://amigobulls.com/articles/why-apple-inc-iphone-growth-will-
pick-up-again
Graham, J. (2016, August 24). Tim Cook at 5 years: More Profits, Less
Innovation. USA Today, Tech, p. 1. Retrieved from
http://www.usatoday.com/story/tech/2016/08/24/tim-cook-5-years-
more-profits-less-innovation/89206978/
Kenny, B. (Producer). (2016, September 1). Behind the Apple Tax
Situation, an Unprecedented Financial Policy. HBS cold call.
Podcast retrieved from http://hbswk.hbs.edu/item/behind-the-apple-
tax-situation-an-unprecedented-financial-policy
NASDAQ (2016a, September 9). Retrieved September 12, 2016, from
http://www.nasdaq.com/symbol/aapl/financials?query=income-
statement
NASDAQ (2016b, September 9). Retrieved September 12, 2016, from
http://www.nasdaq.com/symbol/msft/financials
Quick ratio. (n.d.). Retrieved September 12, 2016, from
http://www.investopedia.com/terms/q/quickratio.asp

4. Rogers, A. (2016, July 14). Your analyst forecast for apple's fiscal 3Q2016.
Retrieved September 12, 2016, from
http://marketrealist.com/2016/07/analysts-expect-apples-fiscal-
3q16-earnings/