AAPL Price Forecast and Price Prediction 2026 (Learn How to CREATE PRICE ESTIMATE)

In this article we will learn how to create a full stock analysis on any stock that we will choose. We’re going to learn how to take the balance sheet, the cash flow coming from operation and create a full estimation for the price.

Today we’re going to examine Apple.

Apple Stock, ticker symbol is AAPL, Industry is Tech, and Pandemic Impact is Positive on the company. It only means that after the pandemic, the amount of profits or earnings and revenue has been growing significantly.

Let’s dive in and see exactly how we’re going to do that so let’s take a look right now on our balance sheet of the company, let’s take a look at what are the keys that are important for us when we want to take a look at a stock like that. So first thing we should do is we need to take a look at a metric called EBITDA. 

What is EBITDA?

EBITDA is basically earnings before interest, taxes, depreciation, and amortization, is a  measure of a company’s overall financial performance and is used as an alternative to net income. So we need to remember that by using that metric we can see if a company is going into a good direction or a bad direction. We want to see if the business is growing fast enough for us. 

We want to always catch opportunities that can beat the market. Beating the market can be a company that is growing faster than the market. Cash Flow – This is one of the metrics that we want to take a look at when we want to invest into stocks. We want to see if the cash flow is growing. Cash Flow can come from different angles, operations, and assets. We want to take a look at what is basically happening to the cash flow. We can ask if Is it growing or is it shrinking?

Another metric that we want to see is the financial ratios. We want to see if we have good financial ratios. It can be EBITDA versus enterprise value price to book value and all the ratios that we have. It can be earnings against debt, which is also one of the metrics that we want to check if the company is not making enough profit and it has a lot of debt that can be a bad signal for us to go into an investment like that so remember it.

Of course, debt ratio is one of the most important things that we want to take a look at. is Can the stock be the market? The reason that we go into stocks is because we don’t want to invest into indexes and want to be diversified in a lot of companies. Sometimes we do want to be diversified but we also want to diversify on stocks that can actually beat the market and give us better growth. So that is regarding those first keys. We also want to check the price to earnings ratio.

What is Price to earning

Price to earning is a ratio that is calculated by dividing the current market price of common shares by the earnings per common share. Common shareholders have rights to a company’s assets only after you pay the bondholders that preferred shareholders, and other debt holders when paid in full, this is basically your money. Free cash flow is the money that remains after paying the items such as payroll rent and taxes. This is what you have to remember or understand on how to trade or make investment using the PE metric. We also want to see if it has a very good entry comparing the historical price value versus earnings we want to see what is the average when we’re talking about financial ratios that we want to compare it to enterprise value it’s not really the same thing because if we want to see that the company is healthy, it doesn;t mean necessary that it’s also in a very attractive price for us compared to the historical data that we have.

Let’s now dive in and go into the company book analysis so this is a balance sheet we can see that the physical year of apple is ending on September 30 every year. That is when we will get the 10k form of the company. Now if we dive deeper we can see that the revenue of Apple started in 2011 at $108B. We can also see that in 2021 it’s already around $365B. By the way, we’ve been trying to keep this information as good as possible. So always when you get data from the websites also validate the data, or go to the companies website and check the information over there in the investor relations section. Usually we can verify it with more sources so we know that we have the best data and avoid wrong investments, and make certain assumptions or make forecasts from information that we are not hundred percent sure is correct. So that is what we’re doing when we want to calculate forecasts.

Revenue

Revenue, we can see that the revenue started with $108B and it’s been going higher to $365B. This is a yearly compounded annual growth rate CAGR of 12.95%. It means that each year the revenue has been growing 12.99% from the year before. That is basically a very good ratio that’s beating the 10 percent of the market rate and we can also see that the EBITDA is growing on the same pace that means that basically the company’s earnings and profits are almost growing on the same line it means that the margin is being the same the amount of profits they create from the revenue they have is basically growing on the same side now remember that we say the impact from coming from the coronavirus was positive, we can see that this year, the apple stock had a bigger revenue right now of 55% from 2020 to 2021. That’s basically huge growth. We can see that if you take for example travel agencies or other companies that’s been going negative on the coronavirus pandemic, we can see that 55% growth is insane. 

Let’s take a look right now and see other metrics that we want to take a look at when we want to invest into stocks. We want to see what the total debt is. There is a difference between total debt and net debt. Basically, total debt is all the money that you have to pay on the short term and the long term and it doesn’t necessarily have to be the total liabilities of the company. A company can have other liabilities besides that but here we took into account the only debt because that’s what we are going to use in most formulas. We will also show you how to calculate enterprise value. I like using formulas and work “By The Book”, I like to be strict or I like to take the formulas and use the formula in order to get clear metrics or valuations for myself and by doing that, I know exactly which stocks I want to focus on. So let’s take a look right now at what is the total debt that we can see right now in 2013. That is really when they started to have debt, in 2011 and 2012, we didn’t really have any debt and in 2013, they had $17B debt, we can see that each year plus minus they have extra $11B debt. Which is not that much for a company like Apple, we can see that the debt helps them to grow really fast. We don’t care about the debt as long as it goes with the earnings to debt ratio. It also means that they’re pretty much going in a good direction and they can pay this debt during the time because they’re making enough profits.

How to calculate net debt and total debt

Net debt is calculated by adding up all of a company’s short and long term liabilities and subtracting its current assets. This figure reflects a company’s ability to meet all of its obligations simultaneously using only those assets that are easily liquidated.There is also a formula to calculate the enterprise value. It is basically what you would have to pay in order to purchase the business. If you want to calculate the enterprise value you have to take the market capitalization which is equal to the current stock price multiplied by the number of shares outstanding shares and you basically have to take the net debt and add it to the market capitalization , that’s how you get the enterprise value.

If you are not sure about your calculation or if you think that you did something wrong or some mistakes you don’t have to worry because at least you’re going to know or understand what is the direction the company is going in.

Let’s take a look right now at the enterprise value on apple. First of all we can see that the market cap in 2011 was 306 billion and the enterprise value was 296 billion which was a little bit lower but if we go through the years we can see that on September 30, the enterprise value is around 2.5 and 2.47 Trillion, which is a monster price and we also want to understand why do we have this valuation and how did we get into that point. 

Two Types Of Metrics

There are two metrics that we want to check just right now. The first metric to check is EV which is Enterprise Value. Compared to the EBITDA, enterprise value as you know is a certain formula that calculates for us how much money would we have to put to purchase the business without any debt or anything else that we basically have on the company sheets.

Currently we have an average of 12.65 through the years on apple stock and apple stock has been growing steadily through the years and for that we can actually give it a good grade. we can see that it’s being traded at a premium. Around the year 2020 it was 27(EV/EBITDA) and in 2021 it was trading at 20 but through the years the average was not more than 14 which basically gives us a total average of 12.65 in general for a stock and in the last three years the multiple was 20. This is going to help us create a forecast regarding how much we believe the stock or the value of Apple can be in the future.

Another ratio we want to take a look on is the net debt. Compared to the EBITDA, we can see that the net debt of Apple is only 0.7, most companies have much higher amounts but anything that is below 3/4. Sometimes even five is really good. That’s what the banks would like to check before they give a loan to a company. We can see that if we compare to the average they usually had 0.50  and right now it’s 0.7 so maybe the depth is a little bit higher than the average but still it’s not it. Apple creates a huge amount of money every year and we can see that they’re earning right now is around 120 billion this year if they want to pay their net debt they can pay the 90 billion dollar just right now and they’re still going to have a lot of money in their pocket so this is not really going to scare us when we want to invest into Apple.

Another ratio that we want to take a look at is P/E or price to earnings. The price to earning ratio through the years was 1 to 17,  Net profit is the EBITDA’s earnings before interest P/E is really how much we make after we pay everything. So this is something that would give us a better understanding about how to price the stock.

We usually know that currently a lot of tech companies are trading with multiples of 1 to 20. At the moment we can see that the average of Apple was 17 and in 2021 it was traded with a P/E of 25 which is above the average. We can see that Apple was beating the market on the pandemic so this is why a lot of people bought the stock.

Let’s discuss some other metrics that we want to take a look on when we want to invest into stocks. So we will start to explain first of all the formulas that we have been using to calculate certain metrics because sometimes you’re going to use some websites that are not going to give you the full information.

If you don’t want to go 10k one by one and go through all the balance sheets of the company this is maybe a shortcut for you on how to calculate certain things. So first of all we want to make a certain calculation and understand what is the free cash flow that we get on each share that we hold. By doing that we can really understand how much profit or how much earnings we really take into our pocket after we pay everybody else, by doing that we can actually understand the company’s valuation for us and make a certain assumption for the future. 

Let’s start with looking right now at the CFO or Cash Flow from Operation. We want to know how much money the company creates for us from the cash flow that comes from the operation that it creates. We take the net income plus non-cash expense plus changes in working capital and that’s how we get the CFO. This is really how we calculated it. We took the net income, net non-cash expense, and changes in working capital. We took this information for the last 10 years and we have the CFO here. 

Now CAPEX is basically funds used by a company to acquire, upgrade and maintain physical assets. That’s basically expenses that you have to spend in order to keep the business running. Apple is a software company. And we can see that the software and tech companies usually have low CAPEX, for tech companies the CAPEXis usually not so high compared to the earnings that it can create so we can see that basically the capex for apple is around $11B and the way that we calculated that is by taking the free cash flow that we have and basically taking down the cash flow from operations that we have created and that’s how we get the CAPEX.

If we want to take a look right now and see what is really happening to the amount of shares that the company really has, we can see that through the years the company actually bought back shares. A company that buybacks shares basically means that it owns a bigger portion of the company through the years that means that if you hold the stock through the years there are less stocks in the market which drives the company’s price higher since the supply of shares on the market shrinks. By doing that, we can actually see that the price is going higher and higher and higher.

So we can see that the cash flow from operation is growing nicely with the revenue which is a very positive sign for us. Because we see that the cash flow from operation is going to align with the revenue that we have for the stock. 

We can see that the capex is growing slower than the cash flow from operation which is a good sign for us it means that the expenses is not growing on the same pace the same as the CFO is growing and we can also see that the free cash flow from operation is going faster than the CFO this is because there is a difference between the CAPEX And CFO. 

The capex is growing slower than the CFO and that’s basically giving us a better free cash flow into our pocket, the investors. In 2011, we had between 20 and 26 billion shares. And now we have only 17 billion shares on the market. This means that each year Apple bought 4.3 percent, which means there are less stocks on the market.

This is really getting the price of the stock higher on the market because there is less supply. Let’s take a look at what’s really happening if we have free cash flow that is growing each year and we have less shares. We get a better free cash flow ratio because we get more cash flow per share because the amount of money we create for the company is being splitted by less shares so that means that we have more free cash flow per share for us and for the owners.

Now the price per share that you will have to put down on september 30 this year will be around $141 but we can see that the company price is growing 28% each year. That means that if you would invest 11.67 in 2011 each year on average you will make 28 which is CRAZY GROWTH. This is beating the market almost three times each year for 10 years straight. 

The market usually creates 10% on average. If you invest in Apple you will make almost 30% each year which is tremendous growth for a company that big. Another metric that is important to us is the earning per share and we want to also calculate and take the average of the P/E so by that we can have a certain calculation to have the stock forecast price for the next couple years we can see that the average earning per share have been growing and we can see that currently the earning per share is 5.61 which we can see it’s going through the years and that can happen also because the buybacks.

There are fewer shares and the amount of profits on the market is being split by fewer owners and we can basically see that this is better for us because we make more money per share.

What is Yield?

Let’s take a look at the yield. Yield is also going to help us calculate the stock for the future because we can create an average for the stock and have an understanding about what’s really going to happen in the future price and we also want to take a look right now on the price to book ratio and the book value per share.

By understanding the forecast of company price and creating a certain average, that will give us the total amount of money we can create out of investing into that specific company. Before that, we need to create a certain forecast in which we will see what’s really happening right now and we can see that each year, Apple has been growing the earnings per share of 18%. We can also see that currently Apple is making $5.61. Now the pandemic really had a good impact on Apple but we don’t really know for how long it’s going to happen.

Let’s assume it’s going to have just the same amount of growth the average amount of growth just right now and then we’re going to take it slower and lower this we’re going to say that the earnings pressure going to go slower just to be conservative about our analysis and we can see that we’re going to get in 2026 a certain earning per share of 11.88. 

When doing that, we can take the long term average P/E ratio which is 17.21. The stock price forecast will be $191. We didn’t take one day earning growth we took the whole average for the last 10 years which is pretty accurate for a stock like that we say that in the next five years it’s gonna have a slower earning growth than it had in the last decade so it might be more accurate for us when we want to make certain price forecast. Now we have $191 for the forecast and we can also see that the current ratio that we have is 25.91 for the stock so that will give us $287 if we take the current ratio that we have right away. The market is a little bit high, it’s more than the long term average.

Since we don’t want to make mistakes, we might want to take the average of the long term and the current ratio and we can see that we have a P/E of 20.6 and we can get a price estimate of $239 just by using the P/E price to earnings ratios.

There is also another way to calculate the price forecast. By taking the free cash flow per share and the growth that we have per year ,we can see that we will have 9.12 FCF per share by 2026 we’re going to use the long-term average FCF ratio of 14.84. This will give us a stock price forecast of $135.

To create an average we can take the current ratio of 25.64, and the long-term average the FCF ratio 25.64, we will get an average ratio of 20 and this basically gives us a price forecast five years from now of $185.

Book Value: Overview

We’ll go back to book value. We can see that book value is calculated per share as follows total assets minus total liabilities and we divided that number by the numbers of shares outstanding. then if we want to have a price to book value you basically take this metric, it gives us the value of the total assets minus the total liabilities.. Then you calculate, take the price per share and you divide it by the book value per share and then you have a certain ratio, using historical data you can get a long term average Book Value Ratio. . If you want to create price estimation using the book value k value metric so that’s basically how you use it.

If we want to make a certain forecast just to understand a little bit about what happened to the historical price of Apple, we use the price to book average here because currently it’s only $3.84 which doesn’t really make sense to use that because that is currently been going  pretty slow and regarding that specific metric, we use the average. It’s going to create a better forecast for the stock because it’s currently trading with price ratios which are much higher than the past.

By doing that we’re going to take right now the 4.86 average book value per share. The average we’re going to take right now is the growth. Which were pretty slow through the years and we can see that currently we are going to get 5.56. If we take the long term price to book ratio which is around 10.75, we can see that we will get a stock price forecast of 60 which is really low compared to the price of apple right now which is $150, if we want to take a look through the current ratio we can see the current ratio is 36 which gives us a certain valuation of $204 using the average and the long term we get a total ratio of 24.

We use the average to calculate. In general, we are being a little bit more conservative with our analysis. We can see that we’re getting a price forecast of $132 using an average of long term ratio + current ratio. All of these numbers that we calculate right now, we will be using this later on for us to make an average for all the prices and then we’re gonna see we’re not gonna use only one way forecast prices but we’re gonna use all the four ways to calculate prices. By doing that we’re gonna get a better price estimation.

Calculating the price forecast using the EBITDA, we will take the last two years’ average because Apple had a good impact from the pandemic and we want to take that into account, let’s say it’s going to have a lower EBITDA for next year, We don’t want to use something that is out of the blue and makes a big impact on the company. We prefer to use the averages to have better estimation.

Using the long term average growth we can see that it will take Apple to 181 billion EBITDA In 2026  which is a monster number and we can see that long-term EBITDA EV ratio is around 12.65 which basically gives us an enterprise value in five years from now of $2.3 trillion. If we want to calculate the market cap we basically have to take the enterprise value and take down the net debt. Assuming that Apple is going to take more debt because they’ve been taking 10 billion each year for the last decade.

Assuming they’re going to take another 10 billion each year for the next decade just to get better growth, the same as you can see it’s working for them and we’re gonna get a total market cap of $2.16 trillion. Assuming Apple is not going to buy back shares just for our calculations and assuming that the free cash flow is going to go with dividends to our pocket so the share outstanding right now is 16.8 billion. That’s the amount of shares we’re going to use and can see that if we take the average of all the prices that we created, we’re getting right now $171 stock price for 2026.

At the fiscal year september 30 2021. The current price was $141. Currently, the target price of our 4 forecast prices will give us an upside of 21 in five years and the cash flow yield from free cash flow from operating free cash flow in general will be around 26%. calculating both of them all together, we will get around 47.71%  which is 9.6% per year. which is not beating the market and that’s why apple might be a very good sign for us to see what’s happening in the market in general but it’s not really going to beat the market.

Final Thoughts

Buying Apple stocks can be a good idea when the price goes down because it’s a very good company with very nice great growth. At the same time it might not beat the market with the current ratios it has.