About
Capital Market Laboratories
Ophir Gottlieb is the CEO & Co-founder of Capital Market Laboratories. Mr Gottlieb’s mathematics, measure theory and machine learning background stems from his graduate work at Stanford University. He is a former option market maker on the NYSE and CBOE exchange floors and has been cited by dozens of various financial media including Reuters, Bloomberg, The NY Times and the Wall St. Journal.
+ FOLLOW THIS TUMBLRApple is crushing its competitors in these financial metrics
Over the last year Apple stock is up 63% while the S&P 500 is up 12%, Microsoft is up 5% and Google is down 1%. AAPL has also outperformed each of the peers and the index over the last 3- and 6-months. In that time, AAPL has reported the largest earnings for a public company ever.
Let’s examine the actual differences between the three largest technology firms in the world, and let’s do it with one image swatch across nine-dimensions, below.
Click to interact with this image
We’ll reference these images throughout the article. The top row measures size, the second row measures margins and the bottom row measures growth and growth expectations. Of these nine-dimensions, five stand out as the definitive differences between these firms and I’ve highlighted the titles in red.
Let’s walk across these images one at a time, and stop to focus on the critical ones.
The first two images in the top row are simple enough. AAPL has massive revenue and net income relative to either GOOGL or MSFT. Most readers already know that, but the sheer size difference is remarkable to note in a visual.
The final chart in the first row measures revenue per employee ($ millions). While AAPL is the largest company in the world it’s absolutely breathtaking to realize how much revenue per employee the firm drives. AAPL generates $2 million per employee which is three times the revenue per employee of MSFT ($680,000) and nearly 40% more revenue per employee than GOOGL ($1.25M).
Let’s take a step back and look at revenue per employee for all of mega cap technology (market cap greater than $50B), below.
Click to interact with this image
Said simply, AAPL generates more revenue per employee than any mega cap technology company in North America, and it’s not even close.
Moving to the second row of images we see that AAPL has lower gross margin % than GOOGL and MSFT, which is the reality of a hardware company versus software companies. But, the second chart on the second row shows the bottom line which is that all three firms keep about the same percent off revenue as earnings (aka net income margin %).
AAPL goes from the lowest gross margin % to approximately the same net income margin % through incredibly efficient cost controls. The last chart on the third row plots research and development (R&D) expense per dollar of total operating expense.
In yet another remarkable feat by AAPL, the firm spends considerably less in R&D than GOOGL and MSFT. In fact, while AAPL spends less than $0.04 on R&D per dollar of operating expense, GOOGL spends more than five times that amount and MSFT spends more than four times that amount.
Let’s take another step back and plot R&D per dollar of operating expense for all of mega cap technology, below.
Click to interact with this image
AAPL spends less money on R&D per dollar of operating expense than all but one mega tech firm. Now look at the companies in that chart and name the most recognized products. I’d start with iPhone, iPad and Apple Watch, each of which belongs to AAPL. One could argue that AAPL isn’t underspending on R&D it’s just doing it better than everyone else.
The final three charts on the bottom row all pertain to growth and this is where the analysis gets absurd. Even with its enormous size, AAPL is still growing earnings faster than both GOOGL and MSFT, while growing revenue percent in double digits.
Summary
AAPL has the largest revenue in all of technology, the largest earnings in the world, generates more revenue per employee than any mega technology firm and shows the largest earnings growth of the three company peer group. While the firm has easily the most recognizable brands, it spends less in R&D (scaled) than all but one of its mega cap peers.
That sounds like stock that should be outperforming; something like 60%+ return in one year and larger returns than the index and its closest (size) peers over every time horizon. That’s AAPL.
The final chart in the last row of charts is Price to Sales (P/S), which can be interpreted as the equity market’s expectations for future growth. Right now AAPL has the smallest P/S of these three peers. I end this article with a chart of P/S for all of mega cap technology, highlighting AAPL, GOOGL and MSFT in yellow.
Click to interact with this image
Let’s examine the actual differences between the three largest technology firms in the world, and let’s do it with one image swatch across nine-dimensions, below.
Click to interact with this image
We’ll reference these images throughout the article. The top row measures size, the second row measures margins and the bottom row measures growth and growth expectations. Of these nine-dimensions, five stand out as the definitive differences between these firms and I’ve highlighted the titles in red.
Let’s walk across these images one at a time, and stop to focus on the critical ones.
The first two images in the top row are simple enough. AAPL has massive revenue and net income relative to either GOOGL or MSFT. Most readers already know that, but the sheer size difference is remarkable to note in a visual.
The final chart in the first row measures revenue per employee ($ millions). While AAPL is the largest company in the world it’s absolutely breathtaking to realize how much revenue per employee the firm drives. AAPL generates $2 million per employee which is three times the revenue per employee of MSFT ($680,000) and nearly 40% more revenue per employee than GOOGL ($1.25M).
Let’s take a step back and look at revenue per employee for all of mega cap technology (market cap greater than $50B), below.
Click to interact with this image
Said simply, AAPL generates more revenue per employee than any mega cap technology company in North America, and it’s not even close.
Moving to the second row of images we see that AAPL has lower gross margin % than GOOGL and MSFT, which is the reality of a hardware company versus software companies. But, the second chart on the second row shows the bottom line which is that all three firms keep about the same percent off revenue as earnings (aka net income margin %).
AAPL goes from the lowest gross margin % to approximately the same net income margin % through incredibly efficient cost controls. The last chart on the third row plots research and development (R&D) expense per dollar of total operating expense.
In yet another remarkable feat by AAPL, the firm spends considerably less in R&D than GOOGL and MSFT. In fact, while AAPL spends less than $0.04 on R&D per dollar of operating expense, GOOGL spends more than five times that amount and MSFT spends more than four times that amount.
Let’s take another step back and plot R&D per dollar of operating expense for all of mega cap technology, below.
Click to interact with this image
AAPL spends less money on R&D per dollar of operating expense than all but one mega tech firm. Now look at the companies in that chart and name the most recognized products. I’d start with iPhone, iPad and Apple Watch, each of which belongs to AAPL. One could argue that AAPL isn’t underspending on R&D it’s just doing it better than everyone else.
The final three charts on the bottom row all pertain to growth and this is where the analysis gets absurd. Even with its enormous size, AAPL is still growing earnings faster than both GOOGL and MSFT, while growing revenue percent in double digits.
Summary
AAPL has the largest revenue in all of technology, the largest earnings in the world, generates more revenue per employee than any mega technology firm and shows the largest earnings growth of the three company peer group. While the firm has easily the most recognizable brands, it spends less in R&D (scaled) than all but one of its mega cap peers.
That sounds like stock that should be outperforming; something like 60%+ return in one year and larger returns than the index and its closest (size) peers over every time horizon. That’s AAPL.
The final chart in the last row of charts is Price to Sales (P/S), which can be interpreted as the equity market’s expectations for future growth. Right now AAPL has the smallest P/S of these three peers. I end this article with a chart of P/S for all of mega cap technology, highlighting AAPL, GOOGL and MSFT in yellow.
Click to interact with this image
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