How Apple Stacks Up

I'm a believer in growth stocks. As an analyst for our Motley Fool Rule Breakers service, I think you should be a believer, too. But even I have to admit some growth stories are bogus, hence this regular series. We'll be taking a closer look at many of the market's great growth stocks to see which of them show real, numerically relevant signs of sustainability.

Next up is Apple (Nasdaq: AAPL), the second-largest company in the world based on market capitalization and a recent pick for our "11 O'Clock Stock" portfolio.

Fools know I'm a longtime Mac user and owner of Apple shares. I've doubled my money buying and selling options in the Mac maker, and I'm sitting on another quadruple today. As a shareholder, Apple has treated me well. Can the good times continue? Let's get to the numbers and find out.

Foolish facts

Data current as of Sept. 18.

For the most part, Fools aren't sure what to think about Apple. But when the bears bite, they bite hard.

"Extreme top-down structure puts all Apple's eggs in one basket. And that basket just had his liver replaced. Look what happened to Apple the last time it lost Steve. When he goes, I think Apple is going to enter a long zombie phase much like Disney did after it's micromanaging boss died," wrote All-Star investor jvaskonen in August.

Really? I don't think the evidence supports this view. Tim Cook did an outstanding job leading Apple during Jobs' time away. He oversaw significant work on the iPad, including development of the iOS-A4 architecture that's become a key part of all Apple mobile devices.

The elements of growth

Source: Capital IQ, a division of Standard & Poor's.

You'd be hard-pressed to find better numbers than the ones in this table. Let's review:

• Revenue growth has remained consistently high, and for the most part, outpaced receivables growth. The 2009 blip is forgivable because Apple was preparing to launch the iPad and iPhone 4 at the time.
• Rising gross margin is always good. Here, it's great. Why? Apple doesn't need to cut prices to build enthusiasm for new products. If anything, consumers are still willing to pay a premium.
• Looking at shares outstanding, it's obvious Apple suffers from dilution. So be it. Tech companies tend to reward employees with options, and options get exercised when stock prices rise.

Competitor and peer checkup

Sources: Capital IQ. Data current as of Sept. 18.

I don't need to say much here, do I? Acer is the low-cost leader in many markets, so its performance isn't surprising. Of the rest, Apple is the only one to surround its computers with an ecosystem of related, high-margin products such as the iPhone and iPad.

To be fair, Dell is trying to break Apple's grip with the Aero and Streak, and Research In Motion (Nasdaq: RIMM) has plans for a tablet of its own. So does HP. But none of these hardware makers has had much success in fighting in the iEmpire. Only Google (Nasdaq: GOOG) has made significant gains, with its Android operating system.

Grade: Sustainable
Apple is now the Rule Maker in consumer electronics gear. As such, it commands pricing power and premium terms with its suppliers. It also has permission from customers to market related products that might seem crazy at first. (The iPad, for example.) This is a train barreling down greased tracks. Either get on board, or get out of the way.

Now it's your turn to weigh in. Do you like Apple at these levels? Would you make it one of our 11 o'clock stocks? Let the debate begin in the comments box below, and when you're done, click here to get today's 11 o'clock portfolio pick.

You can also ask Tim to evaluate a favorite growth story by sending him an email, or replying to him on Twitter.