Choosing Stock Investment Company

Stock investment and trading are some of the most profitable yet volatile ventures in the history of economics. As a result, several factors determine what type of investments should be made in the stock market and when they should be executed. In a nutshell, the potential perforce of a company determines its initial public offering and subsequent performance in the market (Loughran & McDonald, 2020). Apple and HP are publicly traded companies whose growth in valuation has attracted many investors around the world. However, investors need to make critical considerations before pumping their revenue into any company, including the duo mentioned above.

Factors to Consider When Investing in Stock Market

Stock trading is an open investment opportunity for millions of investors worldwide. Making the right investment choice at the personal or cooperate level is an essential step in the venture and determines the ultimate level of success. The main goal of any investment is to gain profit, whether in short-term, medium-term, or long-term goals. The time frame chosen by an investment company helps determine how long the company can recover its assets should something go wrong (Maheshwari & Dhanka, 2018). Boutique investment company seeks to make long-term investments in either of the companies. A resolution is provided later herein.

Secondly, a company’s investment strategy is an essential factor for consideration. Investment strategies embrace value, growth, and income and are dependent on the bankers’ goals. Value investing focuses on undervalued stocks that project a foreseeable increase in value in the future. Growth investing pays attention to stocks that have exhibited a condition of growth in value and price. Income investing targets companies that provide quality stock and reward significant dividends to investors. As for the Boutique Investment Company, the company should embrace income investing.

Another critical factor is the intrinsic value and the share prices. Investors should embrace companies that are undervalued because their prices soar with time. This factor is measured in several metrics such as price-to-earnings ratio, price-to-sales ratio, and price-to-book-value ratios. A detailed look into the above metrics is needed before one invests in any stock trading business. However, investors should not rush to overvalued stocks as markets tend to correct themselves by lowering the share prices, eventually.

The company size helps investors determine what type of investments to make. The boutique investment company should invest in a large and stable publicly traded company. Usually, small-cap companies make little or no profit and are not well established in the market. Such a company’s valuation does not exceed two billion dollars. Mid-cap companies are valued as high as ten billion dollars. The mid-cap companies pose a significantly lower risk than the small-cap ones. They also generate reliable profits out of new products or services and a reliable marketing strategy in a competitive domain (Agrawal et al.,2020). Large-cap companies tend to be safer investment hubs for most traders and generate vast volumes of profits. These companies are well-founded and successful, enjoy market penetration and dominance, and access to diverse assets and resources.

The stock market is very volatile, and investors should study the market fluctuations before making the right move. The rate of fluctuations does not determine the direction the stock prices go, but rather the rate at which they change. Stock prices plummet or surge at times. These changes are subject to the type of companies and the type of products or services provided by such companies. On good days, highly volatile stocks will rise and fall on bad ones. Low-volatility stocks remain stable irrespective of market patterns (Liu et al., 2017). It is important to note that highly volatile stocks do not give investors adequate time to exit the market when the prices plummet, resulting in massive losses over short periods.

Lastly, the preferred company revenue and earnings growth is an essential indicator of the future of the company valuation. Looking at companies from this perspective helps establish the trend in their growth. Revenues consist of all channels bringing money into the company: sales of products and services, interests, and fees, to mention a few (Guan & Liang, 2019). Earnings, on the other hand, refer to the remainder after deducting all company expenses. Since investments aim at making profits, these metric provides an ideal point of view for stock traders.

Company Financial Analysis

Income statement

Table 1. Summary of income statement for Apple and HP companies All values are presented in thousand dollars.

Company Apple HP
Breakdown TTM 10/30/2020 10/30/2019 TTM 10/30/2020 10/30/2019
Operating Cost 347,155,000 274,515,000 347,155,000 62,070,000 56,639,000 58,756,000
Cost of Revenue 204,804,000 169,559,000 161,782,000 49,239,000 46,202,000 47,586,000
Gross profit 142,351,000 104,956,000 98,392,000 12,831,000 10,437,000 11,170,000
Operating Expense 42,413,000 38,668,000 34,462,000 7,699,000 6,710,000 8,169,000
operating income 99,938,000 66,288,000 63,930,000 5,132,000 3,727,000 3,001,000
Net Non Operating Interest Income Expense 345,000 890,000 1,385,000 -256,000 -239,000 -242,000
Other Income Expense 577,000 -87,000 422,000 -142,000 -257,000 -236,000
Pretax income 100,860,000 67,091,000 65,737,000 4,734,000 3,231,000 2,523,000
Tax provision 14,058,000 9,680,000 10,481,000 662,000 387,000 -629,000
Net Income Common Stock holdings 86,802,000 57,411,000 55,256,000 40,72,000 28,44,000 31,52,000
Total Operating Income as Reported 99,938,000 66,288,000 63,930,000 5,056,000 3,462,000 3,877,000
Total expenses 247,217,000 208,227,000 196,244,000 56,938,000 52,912,000 55,755,000
Net Income from Continuing & Discontinued Operation 86,802,000 57,411,000 55,256,000 4,072,000 4,072,000 4,072,000
Normalized Income 86,802,000 57,411,000 55,256,000 4,334,349 4,334,349 4,334,349
Interest Expense 2,607,000 2,873,000 3,576,000 256,000 239,000 242,000
Net Interest Income 45,000 890,000 1,385,000 -256,000 -256,000 -256,000
EBIT 103,467,000 69,964,000 69,313,000 4,990,000 3,470,000 2,765,000
EBITDA 114,464,000 5,771,000
Reconciled Cost of Revenue 204,804,000 169,559,000 161,782,000 48,590,000 45,526,000 46,958,000
Reconciled depreciation 10,997,000 11,056,000 12,547,000 781,000 789,,000 744,000
Net Income from Continuing Operations 86,802,000 57,411,000 55,256,000 4,072,000 2,844,000 3,152,000
Total Unusual Items Excluding Good -305,000 518,000 310,000
Total Unusual Items -305,000 518,000 310,000
Normalized EBITDA 6,076,000 4,777,000 3,819,000
Tax Rate for Calcs 0 0 0
Tax Effect of Unusual Items -42,651 -62,160 -83,700

Balance sheets for Apple and HP

Table 2. Summary of balance sheets for Apple and HP. All values are in thousands of dollars.

Company APPLE HP
Breakdown 10/30/2020 10/30/2019 10/30/2020 10/30/2019
Total Assets 323,888,000 338,516,000 34,681,000 33,467,000
Total Liabilities Net Minority Interest 258,549,000 248,028,000 36,909,000 34,660,000
Total Equity Gross Minority Int 65,339,000 90,488,000 -2,228,000 -1,193,000
Total Capitalization 164,006,000 182,295,000 3,315,000 3,587,000
Common Stock Equity 65,339,000 90,488,000 -2,228,000 -1,193,000
Capital Lease Obligations 1,179,000
Net Tangible Assets 65,339,000 90,488,000 -9,148,000 -8,226,000
Working Capital 38,321,000 57,101,000 -5,572,000 -5,116,000
Invested Capital 177,775,000 198,535,000 3,989,000 3,944,000
Tangible Book Value 65,339,000 90,488,000 -9,148,000 8,226,000
Total Debt 112,436,000 108,047,000 7,396,000 5,137,000
Net Debt 74,420,000 59,203,000 1,353,000 600,000
Share Issued 16,976,763 17,772,944 1,304,000 1,458,000
Ordinary Shares Number 16,976,763 17,772,944 1,304,000 1,458,000

Cash flows

Table 3. Cash flows for Apple and HP companies. All values are in thousands of dollars.

Company Apple HP
Breakdown TTM 10/30/2020 10/30/2019 TTM 10/30/2020 10/30/2019
Operating cash flow 104,414,000 80,674,000 69,391,000 5,435,000 4,316,000 4,654,000
Investing cash flow -9,849,000 -4,289,000 45,896,000 -697,000 -1,016,000 -438,000
Financing cash flow -94,328,000 -86,820,000 -90,976,000 -5,978,000 -2,973,000 -4,845,000
End cash position 35,276,000 39,789,000 50,224,000 3,439,000 4,864,000 4,537,000
Income tax paid supplemental data 19,627,000 9,501,000 15,263,000 0 464,000 89,000
Interest paid supplemental data 2,597,000 3,002,000 3,423,000 0 227,000 240,000
Capital expenditure -9,646,000 -7,309,000 -10,495,000 -526,000 -580,000 -671,000
Issuance of Capital Stock 1,011,000 880,000 781,000 3,108,000 127,000
Issuance of debt 22,370,000 16,091,000 6,963,000 2,112,000 -1,849,000 1,536,000
Payment of debt -7,500,000 -12,629,000 -8,805,000 -1,253,000 -3,107,000 -2,405,000
Purchase of capital stock -83,410,000 -72,358,000 -66,897,000 -5,835,000 3,736,000 3,983,000
Free cash flow 94,768,000 73,365,000 58,896,000 4,909,000 4,316,000 4,654,000

Discussions and Conclusions

Both Apple and HP are high-cap companies and have dominated the stock market for years. The company shares remain significantly stable in the market, making it easy and profitable for investors to exit the market when the prices begin to plummet. It indicates that both companies can prove secure investment for the Bouquet investment company (Guan & Liang, 2019). However, the prices of the company shares differed significantly, with Apple shares trading for as high as $141 while HP shares traded for $28. There is also a tremendous difference in the volumes of shares traded between the two companies in 2019 and 2020. Both Apple and HP were profitable in 2020, even after the COVID-19 paralyzed world economies, resulting in an unprecedented recession.

Profitability analysis

Apple has been profitable since the launch of its first smartphone in 2007, and its revenue growth has been on the rise. The overall profits mainly come from the sale of products such as smartphones, smartwatches, MacBooks, and monitors. A significant portion also comes from the sale of shares. Currently, Apple is the most valuable copay worldwide, with a market cap of over two trillion dollars (Bhakti et al., 2021). HP, on the other hand, is by far much smaller compared to Apple. Although both companies rely on the sale of consumer electronics to raise revenue, HP’s revenues (56.7 billion dollars) are about a quarter of Apple’s (260.17 billion in 2019). There is also a significant gap in the assets owned by the two companies. It implies Apple is better placed to utilize the assets in generating more revenue than HP.

Debt analysis

Both Apple and HP are currently surfacing their debts. HP is, however, spends much less on the same as compared to Apple. The Apple figures do not necessarily mean that Apple is overwhelmed by its debt. There is a linear increase in the companies’ expenditures in clearing debts, which is also proportional to the rise in the gross and net profits. The company’s trade-in stock shares saw a significant drop in shares sold in 2020 due to the economic impact of COVID-19 (Bhakti et al., 2021).

Liquidity analysis

Both Apple and HP manufacture and sell consumer electronics, which have become an essential part of our modern way of life (Guan & Liang, 2019). The companies also depend on their share to generate revenue. While the respective share prices have remained stable and consistently increased in value, they cannot guarantee to generate the required revenues all the time. The prevailing prices in share prices could jeopardize the financial obligations of the companies to investors.

Based on the performance of the Boutique investment company as well as the general stock market, the company should move forward and invest in the stock markets. In this case, Apple is the most appropriate company to invest in due to its large pool of assets, stable share prices, and high dividends to investors. This implies that bankers can be guaranteed a higher return on investment if they choose Apple over HP, the opposite is true. Apple’s large market cap is an assurance that the company cannot collapse any time soon and is worth banking one’s capital for long-term ventures.


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