Apple (AAPL -0.35%) has struggled to grow its top line this year. Revenue fell 1% year over year during its most recently reported quarter, and management called for more of the same in the current fiscal fourth quarter.

This top-line performance is also disappointing when compared to comparable megacap tech companies, including all of the other FAANG stocks. Meta Platforms (formerly Facebook), Amazon, Netflix, and Alphabet (the parent company of Google) all reported top-line growth in their most recent quarters.

Microsoft, though not a FAANG stock, has similarly outperformed Apple's sales trends recently; the software company's quarterly revenue rose 8% year over year for the period ended June 30. 

Yet I still prefer Apple stock over most megacap tech stocks. While a single article couldn't capture my entire bull thesis for the company, one metric does a good job highlighting a key area where the company shines compared to its peers: its research and development (R&D) spending as a percentage of sales. Coming in much lower than most of its peers, this important metric highlights Apple's financial discipline and, subsequently, why I'd bet on it over the other FAANG stocks.

Disciplined spending

Rounded to the nearest percentage point, here's how FAANG stocks and Microsoft stack up on R&D spending as a percentage of revenue on a trailing-12-month basis.

  • Meta Platforms: 29%
  • Amazon: 15%
  • Alphabet: 14%
  • Microsoft: 13%
  • Netflix: 8%
  • Apple: 8%

Showing how it bests the entire group, Apple actually edges out Netflix by 70 basis points, with R&D spending of 7.6% versus 8.3% for Netflix. So it can operate its business with a significantly lower R&D budget than most of its peers.

This isn't a new phenomenon for Apple

One might argue that Apple's disciplined approach could be a drawback, constraining innovation and ultimately limiting the company's growth opportunities. But its frugality isn't a new phenomenon. Indeed, even in the years leading up to the launch of the iPhone, the company's R&D costs as a percentage of revenue were similar to today's levels -- and its spending was lower than peers like Microsoft back then, too.

Discipline is an asset

So how has Apple been able to grow its earnings per share more than 17,000% since 1995 and nearly double it over the last five years with an R&D budget mostly staying around 8% of revenue or below during these periods? That careful spending has created a culture of resourcefulness. Instead of stifling innovation, the iPhone maker's disciplined culture has yielded focus and creativity.

Notably, it spills into all areas of its business, such as acquisitions, where even its largest purchases are nearly immaterial to its business. And it could be a key contributor to the company's willingness to scrap potentially unsuccessful products, even after years of development.

While there's no way to know for sure, I'd theorize that this high bar for product development has been integral to helping Apple protect its brand and remain laser-focused on the areas where its R&D spending gets the biggest bang for its buck.

Of course, a culture of discipline also means the current management and R&D teams have plenty of upside to increase spending if the company deems it necessary. Indeed, Apple has done exactly this recently. Its research spending as a percentage of revenue has increased by about 36% over the last five years (in absolute dollars, it has approximately doubled over this same period), yet it is still below 8% of revenue.

And a nice by-product of financial discipline? Heaps of free cash flow (the excess cash after both regular business operations and capital expenditures are taken care of). Apple currently generates around $100 billion annually in free cash flow and pays this directly and indirectly to shareholders via dividends and share repurchases.

But is discipline enough to compensate for Apple's slow revenue growth today? I'd argue that it's this discipline that makes an acceleration in revenue growth in the future likely. The company's focused business has led to a history of innovation, concentrated across a handful of carefully selected product lines.

Even more, it's led to entirely new successful product categories from time to time like the Apple Watch and AirPods. Given some time and patience, this discipline will likely lead to another blockbuster product or even a totally new product category. In the meantime, investors can rest assured that the company will respect shareholders by remaining careful with every dollar.

Discipline makes Apple the best FAANG stock.