You've likely seen recent news stories about how Apple (AAPL, news) has surpassed Exxon Mobil (XOM, news) -- at least as measured by market capitalization, a simple calculation that multiplies share price times shares outstanding. As of this writing, Apple has a market value of $440 billion, while Exxon is worth $405 billion.
But size isn't what investors should care about. A better question is: Which stock is the better buy?
Well, both have a lot going for them, including mammoth reach, industry dominance and huge brands. But let's drill a little deeper to see how they compare in several key metrics important to investors.
Revenue: Advantage Exxon
No doubt, Apple is a sales machine. Revenue has exploded in the past five years, to about $108 billion in fiscal 2011. Few companies are in the $100 billion sales club. Automakers such as General Motors (GM, news) and financial conglomerates like Warren Buffett's Berkshire Hathaway (BRK.B, news) populate the list.
But guess who's at the top of that list? Yup -- Exxon, with over $450 billion in sales for fiscal 2011. Apple sells a lot, but Exxon sells a lot more.
Revenue growth: Advantage Apple
Even though Exxon leads now, there's no guarantee it will remain ahead of Apple. Quarterly revenue increases happen like clockwork at Apple, most recently with its report that fiscal-first-quarter sales soared 73% year over year. When you consider that sales are up more than fourfold in the past five years, despite the Great Recession, it's hard to ignore Apple's momentum.
Exxon has been on the rise, too, but the truth is that its $450 billion in revenue last year wasn't even its best ever. That total lags the $477 billion Exxon tallied as a result of record oil prices in 2008.
Profits: Advantage Exxon
Apple's fiscal 2011 earnings were some of the best in the history of corporate America -- almost $26 billion in profits during just one 12-month period. That's a staggering amount. However, it doesn't even come close to Exxon, which has recorded five of the seven largest corporate profits in U.S. history -- with its fiscal 2011 total of $41 billion almost doubling Apple's best year.
Profit growth: Advantage Apple
Again, we must turn to the histories of these companies to see which has more growth. Despite the $41 billion in fiscal 2011 profits, Exxon's top tally was $45 billion in 2008. Yes, profits are on the rise -- but they're rebounding more than growing.
Apple, on the other hand, has seen profits go nowhere but up in recent years. Earnings are nearly four times higher in roughly the same period, rising from $13 billion in fiscal 2008 to $44 billion in fiscal 2011. Exxon may be regaining speed, but Apple never slowed down.
Valuation: A tie
When you look at Apple, it's actually quite a good value, with a forward price-to-earnings ratio of 11.5 based on 2012 forecasts. The average for companies in the Standard & Poor's 500 Index ($INX) is around 15, meaning Apple could be a bargain.
However, Exxon looks even better, with a forward P/E of about 9.9.
The trick is not to get too caught up in the headline numbers. After all, P/E ratios can vary widely from industry to industry. Compared with its peers, Exxon isn't all that impressive. Chevron (CVX, news), for instance, has a forward P/E of 7.9. Apple doesn't exactly have peers, but Research In Motion (RIMM, news) has a rock-bottom P/E of about 5.9. Enough said.
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