Apple's Challenging Metric Conversion

On Friday, August 16th, Apple's share price closed above $500 for the first time since January. The recent announcement by Carl Icahn of his investment in Apple, the completion of the first big phase of the planned $60 billion share repurchase program and better than expected iPhone sales in the June quarter have combined to catapult the share price off the 52-week low of $385.10 set back in April.

From the all-time high of $705.07 reached last September to the 52-week low set in April to the closing price of $502.33 on Friday, Apple's share price has gyrated wildly over the past twelve months.

Within weeks Apple will announce its fall product refreshes for the iPhone and iPad lines. Rumors and speculation about the company's forthcoming new products are again receiving broad press coverage. The product news will come at the tail end of Apple's most challenging fiscal year in recent history.

In late October, Apple is likely to report negative net income growth for the fiscal year ending in September and a fourth consecutive quarter of tepid revenue growth. The deterioration in Apple's year-over-year profitability is due in part to the outsized revenue and earnings growth rates achieved in the prior fiscal year. In FY2012, Apple's revenue rose 44.58% and earnings per share rose 59.60%. In the first three quarters of the current fiscal year, Apple's revenue growth rate was 10.7%. Net income, a better metric than earnings per share as Apple repurchases tens of millions of shares, is down 11.89% year-over-year.

Apple's Challenging Metric Conversion
In today's article I am publishing a series of graphs that detail the recent deterioration in a select set of financial performance metrics and mention the challenges Apple faces as management strives to return the company to strong rates of revenue and earnings growth.

Apple's Revenue Growth Rates

The graph below illustrates Apple's revenue growth and revenue growth rates over the most recent fifteen fiscal quarters. 

Although the company has eked out revenue growth of 10.7% in the first nine months of the current fiscal year, due in part to a roughly $1 billion sequential drop in channel supply value in the recent June quarter, the reported revenue growth rate in the period was 0.86%. Apple is now experiencing its slowest rate of revenue growth in years and the revenue growth rate so far this fiscal year is below the 14.4% revenue growth rate realized in recession-plagued FY2009.

Apple's Earnings Per Share Performance
The graph below illustrates Apple's earnings per share and eps growth rates by quarter since FQ1 2010. 

In the first three quarters of the current fiscal year, Apple has reported negative earnings per share growth. Over this nine-month period eps has fallen 11.61% year-over-year to $31.36. The recent negative eps growth is despite fewer shares outstanding in the recent March and June quarters.  In the June quarter, Apple's $7.47 eps performance fell below the $7.79 per share earned two years prior in FQ3 2011.