Apple Inc. (AAPL)vs Alphabet Inc. (GOOGL)

Quick verdict

Two of the three largest companies in the world, close in size and far apart in how the market prices them. Apple is worth $4.49 trillion at 34.92 times trailing earnings; Alphabet is worth $4.19 trillion at 17.17 times. That is roughly half the multiple for a company growing revenue at 15.09% against Apple's 6.43%. Our framework scores Alphabet 3.5 and Apple 2.5, with Alphabet taking valuation and the balance sheet, Apple taking quality and income, and growth and momentum too close to call. The case for Apple rests almost entirely on capital efficiency, where its 51.87% return on invested capital is more than three times Alphabet's 15.14%. Elsewhere, Alphabet is the better-priced asset.

2-year relative performance

At-a-glance comparison

Business model and revenue mix

Alphabet sells advertising against search and video inventory, a business with 60.9% gross margins and almost no marginal cost of delivery. Apple sells devices at 48.65% gross margins and layers services on top. The structural difference shows in what each must spend to grow: operating margins are nearly identical at 33.17% and 33.11%, but Alphabet reaches that figure after far heavier research and infrastructure spending, meaning its incremental revenue is more expensive to produce than the gross margin alone suggests. The two sit in different sectors, Technology for Apple and Communication Services for Alphabet, so a portfolio holding both is less diversified than those labels imply. Betas of 1.09 and 1.24 confirm they trade closely together.

Valuation

Alphabet is the cheaper stock and the gap is not marginal. It trades at 17.17 times trailing earnings against Apple's 34.92, 12.99 times EV/EBITDA against 26.93, and 6.56 times book against 41.81. On sales the two are close, 9.39 against 9.63, which tells you the divergence is about profit per dollar of revenue and the multiple assigned to it, not about revenue scale. The PEG ratios sharpen the point: 0.15 for Alphabet against 1.07 for Apple. A PEG that low usually signals either exceptional value or scepticism that the growth rate holds. Apple's free-cash-flow yield of 3.04% does beat Alphabet's 1.27%, the one valuation measure on which Apple comes out ahead.

Growth profile

Alphabet has grown faster on both lines, though our framework scores this factor too close to separate once everything is weighed. Revenue has compounded at 15.09% over three years against Apple's 6.43%, and earnings per share at 34.19% against 22.59%. Apple's 6.43% carries the most weight in this comparison, because it has to justify a multiple twice Alphabet's. A company growing revenue in the mid single digits at nearly 35 times earnings is relying on margin expansion, buybacks or a re-rating rather than on the top line. Alphabet growing at 15.09% while priced at 17.17 times earnings is the more conventional arrangement, and the reason its PEG lands where it does.

Profitability and quality

Apple wins this factor, and the margin of victory depends on which measure you trust. Return on invested capital is 51.87% against 15.14%, a genuine gap undistorted by capital structure. Both clear the roughly 15% threshold usually associated with durable competitive advantage, but Apple clears it more than three times over. Operating margins are effectively tied at 33.17% and 33.11%. Return on equity is 137.18% against 50.84%, though Apple's figure is inflated by a book equity base that buybacks have shrunk almost to nothing, which is also why its price-to-book is 41.81 against Alphabet's 6.56. Read the ROIC comparison rather than the ROE one; it answers the same question more cleanly.

Balance-sheet risk

Alphabet has the safer balance sheet on the figures available. Its current ratio is 2.72 against Apple's 1.00, so current assets cover near-term liabilities nearly three times over where Apple's cover them exactly once. Net debt to EBITDA is 0.17 for Alphabet against 0.27 for Apple, both negligible. Interest cover at Alphabet runs to 65.55 times. Neither company is remotely constrained by its balance sheet, so this factor matters less here than it would between two leveraged businesses. Apple's thin current ratio is a treasury decision by a company that generates cash continuously, not a warning sign. Lower leverage still gives Alphabet more room to invest through a downturn without touching shareholder returns.

Price performance and shareholder returns

Alphabet has been the stronger holding recently. It returned 71.27% over the past year against Apple's 31.11%, and 38.69% annualised over three years against 19.74%. Year to date Apple leads narrowly, 12.89% against 9.76%. On downside Apple has held up better, with a five-year maximum drawdown of 33.43% against Alphabet's 44.32%. Income is minimal on both sides: Apple yields 0.35% on a 12.13% payout ratio, Alphabet 0.25% on 4.22%. Both only recently began returning cash through dividends and both retain the overwhelming majority of earnings. The multi-year record favours Alphabet, but past performance never guarantees future results, and the two have tracked each other closely enough that neither record says much about the next period.

Which stock fits which investor

Value investors should favour Alphabet, trading at roughly half Apple's earnings multiple while growing more than twice as fast. Income investors will find little of substance on either side. Investors who prize quality at a reasonable price face the real dilemma here: Apple's 51.87% return on invested capital is the better business by that measure, but Alphabet's 15.14% still clears the durability threshold at half the price. Growth is close enough that our framework declines to name a winner. The clearest framing is that Apple asks you to pay a premium for demonstrated capital efficiency, while Alphabet asks you to accept lower capital efficiency in exchange for a materially lower price and faster growth. Your answer depends on which risk you would rather carry.

• Value: GOOGL
• Growth: GOOGL
• Income: AAPL
• Quality: AAPL

Frequently asked questions

Is Apple or Alphabet the better buy right now?

Alphabet scores 3.5 on our six-factor framework and Apple 2.5, driven by Alphabet's valuation and balance-sheet advantage. Apple wins on profitability and income. Alphabet is the better-priced business; Apple is the more capital-efficient one.

Which stock is cheaper, AAPL or GOOGL?

Alphabet, clearly. It trades at 17.17 times trailing earnings against Apple's 34.92, 12.99 times EV/EBITDA against 26.93, and 6.56 times book against 41.81. Its PEG of 0.15 against Apple's 1.07 reflects both the lower multiple and the faster growth.

Which has grown faster, Apple or Alphabet?

Alphabet. Its three-year revenue CAGR is 15.09% against Apple's 6.43%, and its EPS CAGR is 34.19% against 22.59%. Apple's mid-single-digit revenue growth is what makes its higher multiple harder to justify.

Why is Apple's return on equity so much higher than Alphabet's?

Apple's 137.18% ROE against Alphabet's 50.84% is inflated by years of buybacks shrinking its book equity, which also explains its price-to-book of 41.81. Return on invested capital is the cleaner comparison: 51.87% for Apple against 15.14% for Alphabet.

Which pays the better dividend, AAPL or GOOGL?

Both yields are token. Apple pays 0.35% on a 12.13% payout ratio, Alphabet 0.25% on 4.22%. Neither suits an income mandate, and both retain the large majority of earnings for reinvestment and buybacks.

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