Apple’s ability to boost profits with buybacks can continue for many years to come

“Apple’s ongoing buyback program provides a relatively clear path to high single digit EPS growth or better for the next five years, assuming its hardware revenues do not decline and its service segment grows at historical mid-teens,” Bernstein analyst Toni Sacconaghi writes in a note to clients on Wednesday.

Apple Park in Cupertino, California
Apple Park in Cupertino, California

Eric J. Savitz for Barron’s:

A key element of the Apple investment story in recent years has been the company’s aggressive stock-repurchase program. It continues to say that its goal is to reach a cash-neutral position over time, largely via the return of capital to holders via buybacks.

In each of the past four fiscal years, in fact, Apple has returned more than 100% of free cash flow to investors, mostly via buybacks… [Sacconaghi] also says Apple could continue the current buyback pace through 2035 if it were willing to lever up to gross debt twice that of earnings before interest, taxes, depreciation, and amortization, or Ebitda. Under that scenario, he adds, Apple could continue to drive per-share earnings growth, while buying back up to 35% of the outstanding shares.

The analyst notes that from 2013 through 2021, Apple has posted 10% annualized growth in pretax income but 19% growth in earnings per share, thanks in large part to buybacks.

MacDailyNews Take: And continued annual dividend boosts, too!

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    1. Apple’s net cash has gone down every year. Sure they may have $200B in cash on hand, which seemingly is constant, but reality is they have over $100b in debt. This has gone down year after year and at some point their net will be negative. Despite absolutely amazing profits, they are burning off more than they take in, and they need to come to a better equilibrium.

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