An investment of $10,000 in Apple back in August 2016 has impressively grown to about $126,000 today, assuming dividends were reinvested. This remarkable growth, approximately multiplying the investment by 12.6 times over the past decade, underscores Apple’s strong performance over the years. The company’s share price has been the primary contributor to this increase, with stock rising from about $27 in 2016 to around $311 today on a split-adjusted basis. Without the reinvestment of dividends, the initial investment would have grown to roughly $115,000.
Apple’s earnings have seen significant expansion, with earnings per share increasing to approximately $8.72, up from about a quarter of that amount a decade ago. A substantial factor in boosting earnings per share has been Apple’s strategic reduction in share count through large-scale stock buybacks. This approach has contributed to an increase in the per-share value of earnings, benefiting investors.
Another crucial element driving the company’s stock gains has been its valuation. In 2016, investors valued Apple at about 13 times its earnings. Today, that valuation has escalated to roughly 36 times earnings. This combination of enhanced earnings and a higher valuation multiple has played a significant role in the company’s impressive stock performance over the last decade.
However, replicating this success over the next ten years could prove challenging, given that Apple’s current valuation offers limited scope for further expansion in its price-to-earnings ratio. Consequently, future returns are likely to hinge more on sustained growth in earnings. Opportunities for continued growth could arise from advancements in artificial intelligence, new product developments, and leveraging Apple’s extensive installed base. Yet, as the company has grown substantially larger, achieving rapid earnings growth will necessitate significantly increased revenue and profits.
For long-term investors, Apple’s performance over the past decade illustrates the power of combining business growth, share buybacks, and valuation expansion. While the company’s future returns may depend more heavily on the pace of profit growth, the foundation laid in the past years remains a testament to its potential for ongoing success.