Apple Inc. (AAPL)vs Chevron Corporation (CVX)

Quick verdict

A comparison between a technology company priced for continued compounding and an energy company priced for cash return. Apple trades at 34.92 times trailing earnings with a 0.35% dividend yield; Chevron trades at 19.1 times with a 3.49% yield, paying out 84.45% of earnings. Our framework scores Chevron 3.5 and Apple 2.5, awarding Chevron valuation, the balance sheet and income, Apple growth and quality, with momentum too close to separate. Chevron's revenue has contracted 4.64% a year over three years while Apple's grew 6.43%, so the income on offer is not being funded by an expanding business. That is the trade-off in a sentence: yield today against growth tomorrow.

2-year relative performance

At-a-glance comparison

Business model and revenue mix

Chevron operates in Oil and Gas Integrated within the Energy sector; Apple in Consumer Electronics within Technology. The two are exposed to almost entirely different forces, which makes them genuinely complementary in a portfolio rather than substitutes. Chevron's 31% gross margin and 15.83% operating margin reflect a commodity business where the selling price is set by markets rather than by the producer. Apple's 48.65% and 33.17% reflect pricing power. The most striking contrast is beta: 0.49 for Chevron against 1.09 for Apple. Chevron has historically moved at roughly half the market's amplitude, and its 28.89% worst five-year drawdown against Apple's 33.43% makes it the steadier holding of the two despite the cyclicality of its end market.

Valuation

Chevron is the cheaper stock on every measure reported. It trades at 19.1 times trailing earnings against Apple's 34.92, 1.91 times sales against 9.63, 2.07 times book against 41.81, and 7.65 times EV/EBITDA against 26.93. The EV/EBITDA gap is the most telling: Apple is valued at more than three times Chevron's multiple of operating cash generation. Chevron's free-cash-flow yield of 6.36% is more than double Apple's 3.04%. Its PEG of 0.56 against Apple's 1.07 also favours Chevron, though PEG is a strained measure for a company whose revenue is shrinking. A higher multiple is only justified if a company can sustain faster growth or wider margins, and Apple does both.

Growth profile

Apple is the faster grower and the gap is stark, though neither figure is impressive in isolation. Apple's revenue has compounded at 6.43% over three years; Chevron's has contracted at 4.64%. On earnings the pattern is the same but sharper: Apple grew EPS at 22.59% a year while Chevron's fell 31.86%. Chevron's declines are a commodity-cycle artefact rather than evidence of a broken business, since energy earnings track prices that the company does not set. Still, an investor buying Chevron for its 3.49% yield should understand that the payout is currently supported by an 84.45% payout ratio against a shrinking earnings base, which leaves less headroom than a lower payout would.

Profitability and quality

Apple wins on profitability by a wide margin, as it does against almost any comparison. Its 33.17% operating margin more than doubles Chevron's 15.83%, and its 27.62% net margin nearly triples Chevron's 9.87%. Return on invested capital is 51.87% against 7.69%. Above roughly 15% ROIC is usually read as a durable competitive advantage; Chevron sits well below that, which is normal for a capital-intensive commodity producer and not a criticism of management. Return on equity is 137.18% against 10.98%, though Apple's figure is inflated by buybacks having shrunk its book equity. Chevron's returns are structurally capped by the economics of extraction, not by execution.

Balance-sheet risk

Chevron has the safer balance sheet. Its current ratio of 1.36 covers near-term liabilities more comfortably than Apple's 1.00, which leaves current assets exactly matching current liabilities. Net debt sits at 0.51 times EBITDA for Chevron against 0.27 for Apple, so Apple carries less leverage in absolute terms, but Chevron's interest cover of 23.13 times leaves no doubt about its ability to service what it owes. For a cyclical business, balance-sheet strength matters more than it does for Apple: Chevron needs to fund dividends and capital expenditure through commodity downturns without cutting either. Its position looks adequate for that, though the 84.45% payout ratio narrows the buffer.

Price performance and shareholder returns

The two have been close over one year and far apart over three. Chevron returned 28.31% over the past year against Apple's 31.11%, and 28.29% year to date against Apple's 12.89%. Over three years Apple annualised 19.74% against Chevron's 7.75%. Chevron has been the less volatile holding throughout, with a maximum five-year drawdown of 28.89% against Apple's 33.43% and a beta of 0.49 against 1.09. The income difference is the real distinction: Chevron yields 3.49% against Apple's 0.35%, roughly ten times as much. Chevron's 84.45% payout ratio against Apple's 12.13% shows how differently the two treat retained earnings. Past performance never guarantees future results.

Which stock fits which investor

Income investors have a clear answer here: Chevron's 3.49% yield against Apple's 0.35% is not a close call, though the 84.45% payout ratio means the dividend consumes most of current earnings. Value investors should also lean toward Chevron, cheaper on every multiple reported. Growth investors will prefer Apple, the only one of the two currently growing revenue at all. Quality-focused investors will favour Apple on a 51.87% return on invested capital against 7.69%. Because these two businesses respond to entirely different economic forces, the more useful question may not be which to own but whether owning both improves a portfolio more than concentrating in either.

• Value: CVX
• Growth: AAPL
• Income: CVX
• Quality: AAPL

Frequently asked questions

Is Apple or Chevron the better buy right now?

Chevron scores 3.5 on our six-factor framework and Apple 2.5. Chevron wins valuation, balance sheet and income; Apple wins growth and quality. Chevron suits an investor wanting yield and a low multiple; Apple suits one wanting growth and capital efficiency.

Which stock pays a bigger dividend, AAPL or CVX?

Chevron, by roughly ten times. It yields 3.49% against Apple's 0.35%. Chevron pays out 84.45% of earnings to sustain that yield, while Apple pays out just 12.13%, so Chevron has considerably less headroom if earnings fall further.

Which stock is cheaper, Apple or Chevron?

Chevron, on every measure. It trades at 19.1 times trailing earnings against Apple's 34.92, 7.65 times EV/EBITDA against 26.93, and 2.07 times book against 41.81. Its free-cash-flow yield of 6.36% is more than double Apple's 3.04%.

Why is Chevron's revenue shrinking?

Chevron's revenue has contracted at 4.64% a year over three years and its EPS at 31.86%, reflecting commodity price cycles rather than a structural problem. Energy producers do not set their selling prices, so earnings track markets outside management's control.

Which stock is less volatile?

Chevron. Its beta of 0.49 is well under half Apple's 1.09, and its worst five-year drawdown was 28.89% against Apple's 33.43%. Despite operating in a cyclical industry, Chevron has been the steadier holding of the two.

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