Apple (AAPL +1.18%) has delivered exceptional returns to shareholders over the years. Investors who bought Apple 10 years ago have seen their shares rise by 700%. Overall, the company has risen to a market capitalization of more than $2 trillion.
That incredible growth has some curious investors asking if it's too late to buy Apple stock. Let's look closer at the business and its prospects to answer that question.
Image source: Getty Images.
Innovation keeps customers coming back to Apple
Fueling Apple's rise to the top of the business world is its engine of innovation. The company has delivered multiple billion-dollar products with numerous iterations of each. The iPhone, iPad, iMac, Apple Watch, and AirPods have all been huge successes through several versions. That said, more than 50% of Apple's revenue ($71.6 billion) came from sales of iPhones in its most recent quarter, which ended Dec. 25.
The iPhone is the center of the ecosystem that connects to AirPods, the Apple Watch, and a host of services that makes each product more valuable. Indeed, in the quarter ending in December, Apple's services sales reached $19.5 billion. To put that figure into context, Netflix, the world's leading streaming service, generated less than $8 billion in revenue in its most recent quarter, ending Dec. 31.
Apple's ecosystem provides another advantage by making it difficult for consumers to switch to competitors. If you have been with Apple for the last few years, you likely have several of its products and services, and have probably spent considerable time customizing all of them to fit the needs of you and your family. It would be time-consuming to do that all over again with a competing phone manufacturer.
NASDAQ: AAPL
Key Data Points
And the company tries to give consumers little reason to consider switching; Apple's customer service team is available to help resolve any issues.
It has all come together nicely. Apple increased revenue from $156.5 billion in 2012 to $365.8 billion in 2021. That boost in sales is flowing to the bottom line as earnings per share rose from $1.58 to $5.61 over that same time.
Is Apple's stock too expensive?
Despite the company's rise to a market capitalization of over $2 trillion, the stock is not too expensive. Apple has justified the price increases with steadily rising profits and free cash flow. As of this writing, it is trading at a price-to-earnings and price-to-free-cash-flow ratio of 25.92 and 25.69, respectively. That is a little above the averages it has traded for in the last five years.
Valuations for AAPL, MSFT, and GOOGL. Data by YCharts.
Comparatively speaking, using these metrics, the chart above shows that Apple is trading at a lower price than Microsoft and a slightly higher price than Alphabet.
So based on its excellent prospects and fair valuation, it's not too late to buy Apple stock.
