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Apple's Growth Scorecard

Every quarter I try to score growth by top, bottom and product lines. As unforeseen growth is the only driver creating shareholder value, it’s of paramount importance to measuring a company’s performance.

For Apple, the analysis is fairly straight-forward. There are relatively few product lines (seven including the iPad). I measure y/y sales growth and try to form a picture that is easy on the eyes and mind.

The method I’m using now is color coding growth for each line according to the legend to the left.

The table that follows shows each product plus the Net Sales and Earnings lines according to this color coding. I also added an average column for reference.

The following graphs show the same data with color coding for the rates as they change over time. I broke the data into three charts: Top/Bottom lines, Hardware Products, Other Products.

Discussion

Hopefully this representation describes the company’s growth without requiring too much explanation. Earnings growth, which determines ultimate value created is near all-time highs, well into the “Very High” (A) growth band. Apple have recovered from the Moderate-to-High (B/C) bands during the recession and are near the levels of 2007 when the company was trading at a P/E of 50 (today’s P/E for Apple is 20). Sales growth broadly followed earnings growth.

Within the products, the iPhone again shows exceptional performance. The growth during the first five quarters was (literally) off the scale (above 150%–see table for actuals). The average quarterly y/y growth has been 234%! Last quarter’s 92% growth is very near the 100% threshold for exponential growth. This after three years in the market.

The Mac growth is Moderate (B) and that may be because it was not a launch quarter for portables. The Mac underwent Very High (grade of A) growth for a period of 2008. The iPod shows weakness. The product has been in a Low-to-Negative  (D to F) band of growth since the iPhone launched. Clearly a mature product line but one which has been largely subsumed into the iPhone and iPad. The iPod touch is increasingly a large proportion of the iPod line.

The non-hardware product lines are Low-to-Moderate growth products. The Peripherals business tracks very closely to the Mac business and dipped negative during the recession.

Overall, the growth scorecard is in the “Very High” category, or a grade of “A”, mostly driven by the iPhone and iPad. Whether this growth will be reflected in the share price is a question reserved for a future discussion.

  • Hamourabi

    For your highest grade > 100 % don't you think "exceptional" would be more appropriate than "exponential".
    any constant rate growth is exponential whatever the rate is.

    • asymco

      Sorry, that was a typo on my part. I'll fix.

  • VTBoy

    Horace, it looks like you have the same graph for the bottom 2, instead of the Hardware Products and Other Products. Otherwise, great graphs.

    • asymco

      I fixed the second graph.

  • Rob Scott

    Amazing. iPhone's growth will probably be around 100% for the next year or two, there are 100s of millions of feature and not so smart smartphones to cannibalize. But I think the great story of the next 5 years will be the Mac and the iPad. Everything is falling in place to make these killer devices. The reviews of the new Macbook Air are great and we know that the Air is the future of Macbooks. The Air has everything the competition lacks, and now great price too. I expect the Mac family to move to the high growth segment from this quarter onwards.
    I think the iPad is going to be in the exceptional category for the next 4 – 5 years. Apple is an incredible story.

    • http://www.notesark.com iphoned

      ""great story of the next 5 years will be the Mac and the iPad."

      The Mac is now a minor contributor to the bottom line (about 16%) of revenue and shrinking. The iPAD's net income contribution is not that clear yet, due to unknown margins, but is certainly minor at the moment.

      Apple is now basically just an iPhone company as far as the valuation/stock price. So if iPhone growth continues at similar rates, Apples' stock will continue to skyrocket. But the reverse is also a risk.

      • http://www.notesark.com iphoned

        I meant the Mac is 16% of net profit, not revenue…

  • asymco

    Yes, calendar year (unless stated otherwise).

  • Cory

    The second chart says exponential instead of exceptional.

  • Pats

    Outstanding summary of the keys to Apple's growth. Now if we could identify the next big thing to fill in when the iPhone & iPad reach their peak. Although Apple removed Computer from their name, that was probably to ensure that the paradigm shift they were creating via non traditional computers would not be lost.

    • http://seanmccolgan.com Sean

      Consumer robots – iRobot?

  • http://twitter.com/netgarden @netgarden

    Horace, two comments. One, is that the iPod numbers are misleading inasmuch as the company is effectively transitioning that device category from lower ASP, higher volume nanos and shuffles into the higher ASP, but lower volume (relative to shuffle) iPod touch, which is now the top selling iPod. I have always been a bit conflicted with the arbitrary bucketing of iPod touch as an iPod, as it provides for somewhat messy, contradictory analysis.

    Two is you need to somehow factor in Apple Retail to assess Apple's growth scorecard, as it represents the biggest risk, biggest reward/differentiator for the company, and here both average store sales numbers (up 52% YOY) and aggregate sales numbers (up 75% YOY) are jaw-dropping good.

    Mark

    • asymco

      You break out other growth metrics (store sales and sub-products) and they can be revealing but they all roll up into the top line and the bottom line. Those are showing very good performance. I took the easy way out and just pulled my data directly out of the income statement.

      • http://twitter.com/netgarden @netgarden

        Fair enough. Just trying to flag an area of analysis (specific to Apple Retail) that makes Apple qualitatively different than its peers, and framing how that drives certain outputs.

        Cheers,

        Mark

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