Critical Comparison: Apple (AAPL) & Lexmark International (LXK)

Lexmark International (NYSE: LXK) and Apple (NASDAQ:AAPL) are both technology companies, but which is the better stock? We will contrast the two businesses based on the strength of their valuation, risk, earnings, institutional ownership, analyst recommendations, profitabiliy and dividends.

Analyst Ratings

This is a summary of current recommendations and price targets for Lexmark International and Apple, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Lexmark International 0 0 0 0 N/A
Apple 0 8 38 1 2.85

Apple has a consensus target price of $161.44, suggesting a potential upside of 10.32%. Given Apple’s higher probable upside, analysts plainly believe Apple is more favorable than Lexmark International.

Dividends

Lexmark International pays an annual dividend of $1.44 per share and has a dividend yield of 3.6%. Apple pays an annual dividend of $2.52 per share and has a dividend yield of 1.7%. Lexmark International pays out -133.3% of its earnings in the form of a dividend. Apple pays out 29.5% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Lexmark International has increased its dividend for 6 consecutive years and Apple has increased its dividend for 4 consecutive years. Lexmark International is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Earnings & Valuation

This table compares Lexmark International and Apple’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Lexmark International N/A N/A N/A ($1.08) -37.49
Apple $220.46 billion 3.46 $69.72 billion $8.55 17.12

Apple has higher revenue and earnings than Lexmark International. Lexmark International is trading at a lower price-to-earnings ratio than Apple, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Lexmark International and Apple’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Lexmark International 2.17% 7.30% 2.01%
Apple 20.74% 35.09% 14.15%

Risk and Volatility

Lexmark International has a beta of 1.5, suggesting that its stock price is 50% more volatile than the S&P 500. Comparatively, Apple has a beta of 1.28, suggesting that its stock price is 28% more volatile than the S&P 500.

Institutional and Insider Ownership

81.8% of Lexmark International shares are held by institutional investors. Comparatively, 61.3% of Apple shares are held by institutional investors. 2.8% of Lexmark International shares are held by insiders. Comparatively, 0.1% of Apple shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Summary

Apple beats Lexmark International on 8 of the 14 factors compared between the two stocks.

About Lexmark International

Lexmark International, Inc. is a United States-based company, which is a provider of printing and imaging products, software, solutions and services. The Company’s software scans everything from spreadsheets to medical images, and provides services to banking, healthcare, insurance and retail companies. It creates enterprise software, hardware and services that remove inefficiencies of information silos and disconnected processes. It offers various services, such as managed print services, hardware warranty and repair service, professional services and enterprise software services. It offers solutions, such as financial process automation, business process management, Web information integration and consumer loan origination. Its hardware category includes equipment collection program, and Smart multifunction product (MFP) includes device management and mobile print solutions. It produces and distributes millions of supplies each year, including ink, toner and paper.

About Apple

Apple Inc. (Apple) designs, manufactures and markets mobile communication and media devices, personal computers, and portable digital music players, and a variety of related software, services, peripherals, networking solutions, and third-party digital content and applications. The Company’s products and services include iPhone, iPad, Mac, iPod, Apple TV, a portfolio of consumer and professional software applications, the iOS and OS X operating systems, iCloud, and a variety of accessory, service and support offerings. The Company also delivers digital content and applications through the iTunes Store, App StoreSM, iBookstoreSM, and Mac App Store. The Company distributes its products worldwide through its retail stores, online stores, and direct sales force, as well as through third-party cellular network carriers, wholesalers, retailers, and value-added resellers. In February 2012, the Company acquired app-search engine Chomp.

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