Don’t be fooled by Apple’s record high – CNBC

That’s how stock buybacks can change people’s perspective of performance. A company’s earnings per share can be increased by merely eliminating shares. Apple’s $70 billion worth of buybacks in the last two years have accomplished that. Over the last five years, buybacks have wiped out more than a billion shares.

Since September 2015, 6 percent of the company’s shares have been eliminated. That action alone would help EPS rise by 6 percent, but the 15 percent decline in actual earnings doesn’t help. In rough terms, when “E” drops 15 percent and “S” drops 6 percent, you get about a 9 percent drop in EPS. That’s where Apple is now compared to two years ago.

The last four quarters have garnered Apple $45.2 billion in net income — a huge drop from the $53.4 billion it earned in the four quarters ending September 2015.

Consider those numbers in context with this so-called record high price. Record stock prices don’t mean record performances. Stock buybacks can drive up EPS, but they don’t change the fundamentals of a company.


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