Apple - The truth behind the buybacks

Apple is the world’s largest Co by Market Cap yet its book value fell by 33% over the last 24 months

  • Apple’s annual earnings peaked a year ago in 2018, they have fallen 7.7% to $55bn, they are paying a $14bn dividend.

  • Apple are currently 2/3rds of the way through a 2 year $175bn share buyback program, the World’s largest ever such program, (by comparison Microsoft, the world’s 2nd largest company has a $40bn buyback program).

  • Apple still has $200bn of cash but have taken on $109bn of debt, the gearing ratio is now 120%, its highest ever.

  • Apple has supercharged its share price, adding the equivalent value of JP Morgan in 2019 alone.

  • However, as the scale of the share buyback operation is so large, far exceeding its annual earnings the book value of the company has actually fallen by 33% over the last 24 months

  • Apple’s Price to Book ratio is now double the average of the last 5 years.

  • Apple is effectively spending its multi year cash pile on a short term share buyback program that can never be repeated in the near future (Profits – Dividends - Capex are $30 bn) and significantly reducing the book value of the company in the process.

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