Apple Inc. (AAPL)vs Microsoft Corporation (MSFT)

Quick verdict

Apple Inc. (AAPL) and Microsoft Corporation (MSFT) appeal to different investors. On our six-factor framework, AAPL scores 3.5 and MSFT scores 2.5. MSFT looks cheaper on the multiples that matter, while neither clearly grows faster and AAPL earns higher returns on capital. Overall, AAPL edges this comparison, but the right pick depends on whether you prioritise value, growth, income or balance-sheet safety.

2-year relative performance

At-a-glance comparison

Business model and revenue mix

Apple Inc. operates in Consumer Electronics (Technology), while Microsoft Corporation sits in Software - Infrastructure (Technology). Because both compete in the same sector, this is a direct head-to-head and the financial differences below are especially meaningful. AAPL carries a beta of 1.10 versus 1.13 for MSFT, meaning MSFT has historically been the more volatile of the two.

Valuation

On valuation, MSFT is the cheaper stock. AAPL trades on a forward P/E of 26.84 and EV/EBITDA of 31.46, against 16.83 and 15 for MSFT. Price-to-sales is 11.06 vs 9.18, and free-cash-flow yield is 3.6% vs 5.6%. A higher multiple is only justified if the company can sustain faster growth or wider margins, which is exactly what the next sections test.

Growth profile

neither clearly is the faster grower. AAPL has compounded revenue at 6.4% over three years with EPS growth of 22.6%, while MSFT has delivered 14.9% revenue and 15.5% EPS growth. Growth like this is the single biggest driver of long-term returns, but it also tends to come with a richer valuation, so it must be weighed against the multiples above.

Profitability and quality

On profitability and quality, AAPL is stronger. AAPL posts a 32.6% operating margin, 146.7% return on equity and 49.6% return on invested capital. MSFT posts 46.8%, 33.1% and 21.0% respectively. Return on invested capital above roughly 15% is a hallmark of a durable competitive advantage, so this metric deserves particular attention.

Balance-sheet risk

AAPL has the safer balance sheet. AAPL carries net-debt/EBITDA of -1.50x with a current ratio of 1.07, versus 1.00x and 1.28 for MSFT. Lower leverage gives a company more room to invest through a downturn and reduces the risk of dilution or distress.

Price performance and shareholder returns

Over the past year AAPL returned 73.5% against -13.8% for MSFT; on a three-year annualised basis it is 27.2% vs 4.7%. AAPL yields 0.3% and MSFT yields 0.9%. Past performance never guarantees future results, but the multi-year track record shows how the market has rewarded each business so far.

Which stock fits which investor

For value-oriented investors, MSFT is the better fit on today's multiples. Growth investors will likely prefer MSFT, which is expanding faster. Income investors should lean toward MSFT for its higher shareholder yield, while investors who prize quality-at-a-reasonable-price will favour AAPL for its superior returns on capital. This is a comparison of facts, not a recommendation — your time horizon, risk tolerance and existing holdings should drive the final decision.

• Value: MSFT
• Growth: MSFT
• Income: MSFT
• Quality: AAPL

Frequently asked questions

Is AAPL or MSFT the better buy right now?

Neither is universally "better." AAPL scores 3.5 and MSFT scores 2.5 on our six-factor framework. MSFT is cheaper, neither clearly grows faster, and AAPL is higher quality — so the right pick depends on your objective.

Which stock is cheaper, AAPL or MSFT?

MSFT is the cheaper stock across forward P/E (26.84 vs 16.83), EV/EBITDA (31.46 vs 15) and price-to-sales (11.06 vs 9.18).

Which has grown faster, AAPL or MSFT?

neither clearly has the stronger growth profile, with three-year revenue CAGR of 6.4% for AAPL versus 14.9% for MSFT.

Which stock pays a bigger dividend?

AAPL yields 0.3% and MSFT yields 0.9%, so MSFT is the stronger income choice.

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