Apple Inc. (AAPL)vs Advanced Micro Devices, Inc. (AMD)

Quick verdict

Apple and AMD are both filed under technology, and that is roughly where the similarity ends. Apple is a $4.49 trillion business earning a 51.87% return on invested capital while growing revenue at 6.43% a year. AMD is a $838.8 billion business earning 7.58% on capital while growing revenue at 34.34%. On our six-factor framework Apple scores 3.5 and AMD 2.5, but the split is unusually clean: Apple takes valuation, profitability and income, AMD takes growth and the balance sheet, and momentum is too close to separate. What you are choosing between is a company that already converts capital into profit at an exceptional rate, and one buying future scale at 130.56 times trailing earnings. Neither is the obvious answer.

2-year relative performance

At-a-glance comparison

Business model and revenue mix

Apple sells consumer electronics and the services attached to them, which is why its 48.65% gross margin sits below AMD's 53.2% while its operating margin runs more than twice as high. Hardware carries cost of goods; Apple's advantage appears further down the income statement, in pricing power and distribution rather than in the bill of materials. AMD designs semiconductors and outsources fabrication, a model that produces respectable gross margins but leaves heavy research spending between gross and operating profit. The beta figures capture how differently the market treats them: 1.09 for Apple against 2.49 for AMD. AMD has moved more than twice as violently as the index, and its 65.45% five-year maximum drawdown against Apple's 33.43% is the historical record of that.

Valuation

Apple is the cheaper stock on every multiple our provider reports, though cheaper here is strictly relative. Apple trades at 34.92 times trailing earnings, 9.63 times sales and 26.93 times EV/EBITDA. AMD trades at 130.56, 20.31 and 78.18 respectively. Free-cash-flow yields tell the same story from the other direction: 3.04% at Apple against 1.00% at AMD. What complicates the picture is PEG, which adjusts for growth and lands almost identically at 1.07 for Apple and 1.05 for AMD. Read literally, the market is charging a similar price per unit of expected growth at both companies. AMD's premium is not obviously irrational; it is a bet that the growth rate persists long enough to justify it.

Growth profile

AMD is growing several times faster on both lines. Revenue has compounded at 34.34% over three years against Apple's 6.43%, and earnings per share at 164.36% against 22.59%. That earnings figure deserves context rather than applause: compounding off a small base produces large percentages, and AMD's 15.58% net margin against Apple's 27.62% shows how much distance remains between them. Apple's 6.43% revenue growth is the number that should give a buyer pause at 34.92 times earnings, because it implies the multiple rests on margin durability and buybacks rather than expansion. AMD's problem is the mirror image. Its growth is real, but it is priced as though it continues, and semiconductor cycles have historically been unkind to that assumption.

Profitability and quality

This is the widest gap between the two companies. Apple posts a 33.17% operating margin and a 27.62% net margin; AMD posts 15.71% and 15.58%. Return on invested capital is 51.87% against 7.58%. Above roughly 15%, ROIC is usually read as evidence of a durable competitive advantage, and Apple clears that threshold more than three times over while AMD sits well below it. Apple's 137.18% return on equity is inflated by years of buybacks shrinking the equity base and should not be taken as thirteen times better than AMD's 10.07% in any operational sense, but the ROIC comparison carries no such distortion. On how efficiently each business turns capital into profit today, this is not a close contest.

Balance-sheet risk

AMD has the safer balance sheet, the one factor that cuts against the pattern above. AMD carries net debt of -0.08 times EBITDA, meaning cash slightly exceeds borrowings, and a current ratio of 2.61 covers near-term obligations more than twice over. Interest cover runs at 44.14 times. Apple carries net debt at 0.27 times EBITDA, modest in absolute terms, but its current ratio of 1.00 leaves current assets exactly matching current liabilities with no margin. Apple's position is a deliberate treasury choice rather than a constraint, and a company generating Apple's cash flow is not endangered by a current ratio of 1.00. On the figures alone, though, AMD has more room to absorb a bad year without external funding.

Price performance and shareholder returns

AMD has been the better holding over every window our data covers. It returned 178.92% over the past year against Apple's 31.11%, and 66.99% annualised over three years against 19.74%. Year to date the split is 130.18% against 12.89%. The cost of those returns sits in the drawdown figures: AMD has fallen 65.45% peak to trough over five years, Apple 33.43%. An investor who held AMD through that period earned roughly three times Apple's annualised return and had to sit through roughly twice the decline to collect it. Apple pays a 0.35% dividend on a 12.13% payout ratio; AMD pays nothing and retains everything for reinvestment. Past performance never guarantees future results.

Which stock fits which investor

Value-oriented investors will find Apple the better fit, though at 34.92 times earnings it is cheap only by comparison. Growth investors will prefer AMD, expanding revenue more than five times faster. Income investors have little to work with on either side: Apple's 0.35% yield is nominal and AMD pays nothing at all. Investors who prize quality at a reasonable price will favour Apple decisively, on a 51.87% return on invested capital against 7.58%. The honest summary is that these two stocks answer different questions. Apple is a bet on an established profit engine continuing to compound; AMD is a bet on a growth rate outrunning a demanding multiple. This is a comparison of facts, not a recommendation, and your horizon and existing holdings should drive the decision.

• Value: AAPL
• Growth: AMD
• Income: AAPL
• Quality: AAPL

Frequently asked questions

Is Apple or AMD the better buy right now?

Neither is universally better. Apple scores 3.5 and AMD 2.5 on our six-factor framework, but they win on different factors: Apple takes valuation, profitability and income, AMD takes growth and the balance sheet. Apple suits an investor who wants proven capital efficiency; AMD suits one willing to pay 130.56 times earnings for 34.34% revenue growth.

Which stock is cheaper, AAPL or AMD?

Apple, on every multiple reported. It trades at 34.92 times trailing earnings against AMD's 130.56, 9.63 times sales against 20.31, and 26.93 times EV/EBITDA against 78.18. Adjusted for growth the gap nearly disappears, with PEG ratios of 1.07 and 1.05 respectively.

Which has grown faster, Apple or AMD?

AMD, by a wide margin. Its three-year revenue CAGR is 34.34% against Apple's 6.43%, and its EPS CAGR is 164.36% against 22.59%. The earnings figure is flattered by a low starting base, which is worth remembering when comparing it directly with Apple's.

Does AMD pay a dividend?

No. AMD's dividend yield is 0% and it retains all earnings for reinvestment. Apple pays 0.35% on a 12.13% payout ratio, which is modest but not zero. Neither stock suits an income mandate on yield alone.

Which stock is more volatile, AAPL or AMD?

AMD, substantially. Its beta of 2.49 is more than double Apple's 1.09, and its worst five-year drawdown was 65.45% against Apple's 33.43%. AMD's higher returns have come with roughly twice the downside when sentiment turns.

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