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GUIDE: AAPL Price Forecast and Price Prediction 2026 (Learn How to CREATE PRICE ESTIMATE)
In this article we will learn how to create a full stock analysis on any stock that we will choose. We’re going to learn how to take the balance sheet, the cash flow coming from operation and create a full estimation for the price.
Today we’re going to examine Apple.
Apple Stock, ticker symbol is AAPL, Industry is Tech, and Pandemic Impact is Positive on the company. It only means that after the pandemic, the amount of profits or earnings and revenue has been growing significantly.
Let’s dive in and see exactly how we’re going to do that so let’s take a look right now on our balance sheet of the company, let’s take a look at what are the keys that are important for us when we want to take a look at a stock like that. So first thing we should do is we need to take a look at a metric called EBITDA.
What is EBITDA?
EBITDA is basically earnings before interest, taxes, depreciation, and amortization, is a measure of a company’s overall financial performance and is used as an alternative to net income. So we need to remember that by using that metric we can see if a company is going into a good direction or a bad direction. We want to see if the business is growing fast enough for us.
What is Price to earning
Price to earning is a ratio that is calculated by dividing the current market price of common shares by the earnings per common share. Common shareholders have rights to a company’s assets only after you pay the bondholders that preferred shareholders, and other debt holders when paid in full, this is basically your money. Free cash flow is the money that remains after paying the items such as payroll rent and taxes. This is what you have to remember or understand on how to trade or make investment using the PE metric. We also want to see if it has a very good entry comparing the historical price value versus earnings we want to see what is the average when we’re talking about financial ratios that we want to compare it to enterprise value it’s not really the same thing because if we want to see that the company is healthy, it doesn;t mean necessary that it’s also in a very attractive price for us compared to the historical data that we have.
Two Types Of Metrics
There are two metrics that we want to check just right now. The first metric to check is EV which is Enterprise Value. Compared to the EBITDA, enterprise value as you know is a certain formula that calculates for us how much money would we have to put to purchase the business without any debt or anything else that we basically have on the company sheets.
Currently we have an average of 12.65 through the years on apple stock and apple stock has been growing steadily through the years and for that we can actually give it a good grade. we can see that it’s being traded at a premium. Around the year 2020 it was 27(EV/EBITDA) and in 2021 it was trading at 20 but through the years the average was not more than 14 which basically gives us a total average of 12.65 in general for a stock and in the last three years the multiple was 20. This is going to help us create a forecast regarding how much we believe the stock or the value of Apple can be in the future.
Another ratio we want to take a look on is the net debt. Compared to the EBITDA, we can see that the net debt of Apple is only 0.7, most companies have much higher amounts but anything that is below 3/4. Sometimes even five is really good. That’s what the banks would like to check before they give a loan to a company. We can see that if we compare to the average they usually had 0.50 and right now it’s 0.7 so maybe the depth is a little bit higher than the average but still it’s not it. Apple creates a huge amount of money every year and we can see that they’re earning right now is around 120 billion this year if they want to pay their net debt they can pay the 90 billion dollar just right now and they’re still going to have a lot of money in their pocket so this is not really going to scare us when we want to invest into Apple.
Another ratio that we want to take a look at is P/E or price to earnings. The price to earning ratio through the years was 1 to 17, Net profit is the EBITDA’s earnings before interest P/E is really how much we make after we pay everything. So this is something that would give us a better understanding about how to price the stock.
What is Yield?
Let’s take a look at the yield. Yield is also going to help us calculate the stock for the future because we can create an average for the stock and have an understanding about what’s really going to happen in the future price and we also want to take a look right now on the price to book ratio and the book value per share.
By understanding the forecast of company price and creating a certain average, that will give us the total amount of money we can create out of investing into that specific company. Before that, we need to create a certain forecast in which we will see what’s really happening right now and we can see that each year, Apple has been growing the earnings per share of 18%. We can also see that currently Apple is making $5.61. Now the pandemic really had a good impact on Apple but we don’t really know for how long it’s going to happen.
Let’s assume it’s going to have just the same amount of growth the average amount of growth just right now and then we’re going to take it slower and lower this we’re going to say that the earnings pressure going to go slower just to be conservative about our analysis and we can see that we’re going to get in 2026 a certain earning per share of 11.88.
When doing that, we can take the long term average P/E ratio which is 17.21. The stock price forecast will be $191. We didn’t take one day earning growth we took the whole average for the last 10 years which is pretty accurate for a stock like that we say that in the next five years it’s gonna have a slower earning growth than it had in the last decade so it might be more accurate for us when we want to make certain price forecast. Now we have $191 for the forecast and we can also see that the current ratio that we have is 25.91 for the stock so that will give us $287 if we take the current ratio that we have right away. The market is a little bit high, it’s more than the long term average.
Since we don’t want to make mistakes, we might want to take the average of the long term and the current ratio and we can see that we have a P/E of 20.6 and we can get a price estimate of $239 just by using the P/E price to earnings ratios.
There is also another way to calculate the price forecast. By taking the free cash flow per share and the growth that we have per year ,we can see that we will have 9.12 FCF per share by 2026 we’re going to use the long-term average FCF ratio of 14.84. This will give us a stock price forecast of $135.
To create an average we can take the current ratio of 25.64, and the long-term average the FCF ratio 25.64, we will get an average ratio of 20 and this basically gives us a price forecast five years from now of $185.
At the fiscal year september 30 2021. The current price was $141. Currently, the target price of our 4 forecast prices will give us an upside of 21 in five years and the cash flow yield from free cash flow from operating free cash flow in general will be around 26%. calculating both of them all together, we will get around 47.71% which is 9.6% per year. which is not beating the market and that’s why apple might be a very good sign for us to see what’s happening in the market in general but it’s not really going to beat the market.
Final Thoughts
Buying Apple stocks can be a good idea when the price goes down because it’s a very good company with very nice great growth. At the same time it might not beat the market with the current ratios it has.
Best Trading Education Website => Trade Plus Academy
In this article we will learn how to create a full stock analysis on any stock that we will choose. We’re going to learn how to take the balance sheet, the cash flow coming from operation and create a full estimation for the price.
Today we’re going to examine Apple.
Apple Stock, ticker symbol is AAPL, Industry is Tech, and Pandemic Impact is Positive on the company. It only means that after the pandemic, the amount of profits or earnings and revenue has been growing significantly.
Let’s dive in and see exactly how we’re going to do that so let’s take a look right now on our balance sheet of the company, let’s take a look at what are the keys that are important for us when we want to take a look at a stock like that. So first thing we should do is we need to take a look at a metric called EBITDA.
What is EBITDA?
EBITDA is basically earnings before interest, taxes, depreciation, and amortization, is a measure of a company’s overall financial performance and is used as an alternative to net income. So we need to remember that by using that metric we can see if a company is going into a good direction or a bad direction. We want to see if the business is growing fast enough for us.
What is Price to earning
Price to earning is a ratio that is calculated by dividing the current market price of common shares by the earnings per common share. Common shareholders have rights to a company’s assets only after you pay the bondholders that preferred shareholders, and other debt holders when paid in full, this is basically your money. Free cash flow is the money that remains after paying the items such as payroll rent and taxes. This is what you have to remember or understand on how to trade or make investment using the PE metric. We also want to see if it has a very good entry comparing the historical price value versus earnings we want to see what is the average when we’re talking about financial ratios that we want to compare it to enterprise value it’s not really the same thing because if we want to see that the company is healthy, it doesn;t mean necessary that it’s also in a very attractive price for us compared to the historical data that we have.
Two Types Of Metrics
There are two metrics that we want to check just right now. The first metric to check is EV which is Enterprise Value. Compared to the EBITDA, enterprise value as you know is a certain formula that calculates for us how much money would we have to put to purchase the business without any debt or anything else that we basically have on the company sheets.
Currently we have an average of 12.65 through the years on apple stock and apple stock has been growing steadily through the years and for that we can actually give it a good grade. we can see that it’s being traded at a premium. Around the year 2020 it was 27(EV/EBITDA) and in 2021 it was trading at 20 but through the years the average was not more than 14 which basically gives us a total average of 12.65 in general for a stock and in the last three years the multiple was 20. This is going to help us create a forecast regarding how much we believe the stock or the value of Apple can be in the future.
Another ratio we want to take a look on is the net debt. Compared to the EBITDA, we can see that the net debt of Apple is only 0.7, most companies have much higher amounts but anything that is below 3/4. Sometimes even five is really good. That’s what the banks would like to check before they give a loan to a company. We can see that if we compare to the average they usually had 0.50 and right now it’s 0.7 so maybe the depth is a little bit higher than the average but still it’s not it. Apple creates a huge amount of money every year and we can see that they’re earning right now is around 120 billion this year if they want to pay their net debt they can pay the 90 billion dollar just right now and they’re still going to have a lot of money in their pocket so this is not really going to scare us when we want to invest into Apple.
Another ratio that we want to take a look at is P/E or price to earnings. The price to earning ratio through the years was 1 to 17, Net profit is the EBITDA’s earnings before interest P/E is really how much we make after we pay everything. So this is something that would give us a better understanding about how to price the stock.
What is Yield?
Let’s take a look at the yield. Yield is also going to help us calculate the stock for the future because we can create an average for the stock and have an understanding about what’s really going to happen in the future price and we also want to take a look right now on the price to book ratio and the book value per share.
By understanding the forecast of company price and creating a certain average, that will give us the total amount of money we can create out of investing into that specific company. Before that, we need to create a certain forecast in which we will see what’s really happening right now and we can see that each year, Apple has been growing the earnings per share of 18%. We can also see that currently Apple is making $5.61. Now the pandemic really had a good impact on Apple but we don’t really know for how long it’s going to happen.
Let’s assume it’s going to have just the same amount of growth the average amount of growth just right now and then we’re going to take it slower and lower this we’re going to say that the earnings pressure going to go slower just to be conservative about our analysis and we can see that we’re going to get in 2026 a certain earning per share of 11.88.
When doing that, we can take the long term average P/E ratio which is 17.21. The stock price forecast will be $191. We didn’t take one day earning growth we took the whole average for the last 10 years which is pretty accurate for a stock like that we say that in the next five years it’s gonna have a slower earning growth than it had in the last decade so it might be more accurate for us when we want to make certain price forecast. Now we have $191 for the forecast and we can also see that the current ratio that we have is 25.91 for the stock so that will give us $287 if we take the current ratio that we have right away. The market is a little bit high, it’s more than the long term average.
Since we don’t want to make mistakes, we might want to take the average of the long term and the current ratio and we can see that we have a P/E of 20.6 and we can get a price estimate of $239 just by using the P/E price to earnings ratios.
There is also another way to calculate the price forecast. By taking the free cash flow per share and the growth that we have per year ,we can see that we will have 9.12 FCF per share by 2026 we’re going to use the long-term average FCF ratio of 14.84. This will give us a stock price forecast of $135.
To create an average we can take the current ratio of 25.64, and the long-term average the FCF ratio 25.64, we will get an average ratio of 20 and this basically gives us a price forecast five years from now of $185.
At the fiscal year september 30 2021. The current price was $141. Currently, the target price of our 4 forecast prices will give us an upside of 21 in five years and the cash flow yield from free cash flow from operating free cash flow in general will be around 26%. calculating both of them all together, we will get around 47.71% which is 9.6% per year. which is not beating the market and that’s why apple might be a very good sign for us to see what’s happening in the market in general but it’s not really going to beat the market.
Final Thoughts
Buying Apple stocks can be a good idea when the price goes down because it’s a very good company with very nice great growth. At the same time it might not beat the market with the current ratios it has.
Best Trading Education Website => Trade Plus Academy