If you had invested $10,000 in Apple back in August 2016 and reinvested any dividends, today your investment would be valued at approximately $126,000. This remarkable growth, about 12.6 times the initial amount, underscores Apple’s impressive long-term market performance. The increase in Apple’s share price has been a significant contributor to these gains, with its stock rising on a split-adjusted basis from around $27 in 2016 to about $311 currently. Even without reinvesting dividends, the $10,000 investment would have grown to nearly $115,000.
Over the past decade, Apple’s earnings per share have surged significantly to $8.72, a stark increase from roughly a quarter of that amount ten years ago. This growth has been bolstered by Apple’s aggressive stock buyback programs, which have reduced the number of shares in circulation, thus boosting earnings per share. Additionally, Apple’s valuation has seen a substantial increase. In 2016, investors valued the company at approximately 13 times earnings, whereas today it commands a valuation of about 36 times earnings. This combination of robust earnings growth and a higher valuation multiple has been instrumental in driving the stock’s substantial appreciation.
Looking to the future, replicating such impressive performance over the next decade presents challenges. Apple’s current high valuation offers limited room for further major expansion in its price-to-earnings ratio. Consequently, future returns are likely to hinge more heavily on the company’s ability to sustain its earnings growth. Prospects for continued growth could be found in areas like artificial intelligence, new product releases, and leveraging Apple’s vast installed user base.
However, as Apple has grown larger, maintaining rapid earnings growth will require even more significant increases in both revenue and profits. For long-term investors, Apple’s performance over the past decade exemplifies the potent combination of business growth, strategic share buybacks, and valuation expansion. Yet, moving forward, the company’s potential returns will likely depend more on the speed at which it can increase its profits.