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Apple @ $500B! Fundamental metrics – CCC, Stock Turns and GMROI

Apple @ $500B! Fundamental metrics – CCC, Stock Turns & GMROI

I just a headline and it does not surprise anyone who follows fundamentals. Compare companies like Apple with negative Cash Conversion Cycles,  high stock turns, high GMROI and low PE multiples with others that are exactly the opposite and you know what irrational exuberance is and how smart money is shorting a lot of companies that are fundamentally flawed.

Apple Inc. Market Value Surpasses $500B

http://www.valuewalk.com/2013/12/apple-inc-market-value-surpasses-500b/#utm_source=twitterfeed&utm_medium=twitter&utm_campaign=Feed%3A+ValuewalkBusiness+%28ValueWalk+»+Business%29

This is a screen shot from a 2011 presentation that I made on why certain companies like Apple have their business model driving the core metrics of any business, Cash Conversion Cycle, Stock Turns & GMROI.

screen-shot-2013-09-20-at-8-43-44-am

Look at it now and with a PE of around 14 there’s a long runway for investors to leverage in companies like Apple. When I advised my mentor who  is a very senior investment banker, board member of a few financial powerhouses in 2010 and recently, he did go out and re-organize his portfolio  based on fundamentals of three key metrics that I presented. He is very happy with his IRR and for me that is a great learning on how fundamentals matter the most.

Screen Shot 2013-12-02 at 7.28.06 PM
http://www.google.com/finance?cid=22144

Screen Shot 2013-12-02 at 7.28.58 PM  Screen Shot 2013-12-02 at 7.29.08 PM
http://financials.morningstar.com/ratios/r.html?t=AAPL

80:20 PRINCIPLE OF ENGINEERING, WHY APPLE’S PRODUCTS ARE ‘DESIGNED IN CALIFORNIA’ BUT ‘ASSEMBLED IN CHINA’
https://gerardjrego.com/2013/09/29/8020-principle-of-engineering-why-apples-products-are-designed-in-california-but-assembled-in-china/comment-page-1/#comment-122

80:20 WHY DESIGNED BY APPLE IS $2M+ REVENUE PER EMPLOYEE IS THE REFLECTION OF REAL VALUE
https://gerardjrego.com/2013/09/30/8020-why-designed-by-apple-is-2m-revenue-per-employee-is-the-reflection-of-real-value/

“WHY INVENTORY METRICS TELL YOU SO MUCH ABOUT A COMPANY! CCC, STOCK TURNS, ETC.”

When I made a presentation in Q3 of 2011 to a group of executives from randomly selected tech companies and said this is exactly what you see lies ahead and a few of these companies will either disappear, go out of business or will have to radically change the game.  Their question was how did you figure out all of this. I said simple. Look at this slide from MorningStar public data on Cash Conversion Cycle, Stock Turns, etc. and you really know that their business models are either working or not.

Fast forward 2013, take a look at these companies and you can see the ones that are really in trouble today were the same in 2011 based on these fundamentals 101 metrics!  Wow now that is pretty fundamental isn’t it?

https://gerardjrego.com/2013/09/13/why-inventory-metrics-tell-you-so-much-about-a-company-ccc-stock-turns-etc/

A lot of investments are in companies that look like this.

IrrationalExuberance  and smart capital follows.

Apple is a good example of business model innovation. Not great technologies or IP. The core of any business model is to move inventory. Apple and a few others are doing that really well. When companies don’t then they have high gearing ratios with all the capital that they have to borrow to keep the inventory holding costs being financed. In this time and age. 36 months and you are gone!

So either  you have a really smart plan and idea that can change the world, or find folks and companies who do and back them and let them work for your capital and equity. That’s what “smart capital” & investors do.

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