Everyone is familiar with Apple (AAPL 1.76%). As one of the best-known brands in the world, the business sells some of the most in-demand hardware products that consumers pay premium prices to own.

Apple shares have made for a fantastic investment over the years, climbing 817% in the last decade. And more recently, they rose 48% in 2023, beating the Nasdaq Composite.

But before you rush to buy this FAANG stock in 2024, here are four things you need to know.

1. The importance of the iPhone

Although the company sells a variety of hardware products, like the Apple Watch, AirPods, MacBook, and iPad, Apple is still incredibly dependent upon the iPhone. In the last fiscal year (ended Sept. 30), the business generated 52% of its revenue from the flagship smartphone.

From a profitability perspective, this is a good thing. The iPhone only represents about 20% of global smartphone shipments, but due to its pricing power, it accounts for roughly 80% of the industry's operating income. This helps explain why Apple is such a profitable enterprise.

However, the iPhone is in a mature stage in its life cycle. With new upgrades having fewer game-changing features, it's easier for consumers to choose not to update their phones every year, instead holding on to their existing ones for longer.

2. Growing services

What makes Apple a truly great business is not just its hardware products, but the entire ecosystem. And a key aspect of this is the company's growing services segment. This division includes things like Apple Pay, iCloud, News, Music, and TV+.

Services have been expanding at a faster rate than products in recent times. In fiscal 2023, services saw revenue increase by 9%, representing 22% of the overall company's sales. As more of Apple's revenue comes from services, it can be a boon for profitability, as this division carries a stellar gross margin of 71%.

Perhaps more importantly, Apple's services drive customer loyalty and stickiness. They give consumers less reason to leave for offerings from competitors.

3. Aggressive share repurchaser

I've mentioned how profitable Apple is. In the past 10 years, the company's operating margin has averaged a superb 27.9%. This isn't what you're used to seeing from a typical consumer electronics business. It points to Apple's strong brand and differentiation.

Additionally, Apple generates copious amounts of free cash flow (FCF). In just the last three fiscal years, FCF totaled a whopping $304 billion. Remember, this is the money left over after the business reinvests in growth opportunities. And it affords Apple financial flexibility that other companies can only dream about.

Management has used this FCF to aggressively buy back stock. Last fiscal year, nearly $78 billion went toward repurchasing shares. And in the last five years, the company's outstanding share count has been reduced by 21%.

4. Expensive valuation

While it's difficult to find reasons not to like Apple's business, there's one important reason that investors should hesitate before buying the stock: valuation.

As of this writing, shares trade at a price-to-earnings ratio of 29.8. This is significantly more expensive than Apple's trailing-10-year average of 20.8. And it represents a huge premium to the S&P 500.

It's challenging to be optimistic about Apple generating market-beating returns going forward when the valuation is so high. This is especially true given how mature the company is these days, with more muted growth prospects than it had in past years.