Google Outperforms Apple with 219.93% Return Over Five Years

Apple and Google have both outperformed the S&P 500 index over the past five years, with Google showing a total return of 219.93% compared to Apple's 108.60%. This performance highlights the attractive risk-return profiles of these companies.

While Apple has a broader economic moat, Google offers investors greater upside potential due to its lower valuation and superior growth metrics. Google's current price-to-earnings ratio is 23.65, significantly lower than Apple's 32.47. Additionally, Google's diluted earnings per share growth rate is 22.21%, compared to Apple's 9.03%. This makes Google a more attractive choice with lower downside risk and higher upside potential compared to Apple.

Both companies have strong competitive advantages that are crucial for their long-term success and for investors to preserve their capital. Apple's advantages include its ecosystem, strong brand value, and healthy financial condition, which provide an economic moat. Google's advantages include its dominant position in search engines, brand value, vast data advantages, positioning in cloud services, and financial strength.

In terms of valuation, Google is the more attractive option. Google's current price-to-earnings ratio (GAAP [FWD]) is 23.65, while Apple's is 32.47. Furthermore, Google's TTM is 7.72, lower than Apple's 8.82, indicating that Google is a more attractive choice in terms of valuation.

Google not only excels in valuation but also in growth. Apple's diluted earnings per share 3-year [CAGR] is 2.85%, while Google's is 20.40%, showing that Google's earnings per share growth has been significantly higher than Apple's over the past three years. Additionally, Google's 3-year EBIT [CAGR] is 14.31%, much higher than Apple's 3.24%, further supporting the analysts' view that Google is the better choice in terms of growth.

Both companies have strong profitability indicators. Google's EBIT margin (TTM) is 33.16%, while Apple's is slightly lower at 31.87%. These indicators show that both Google and Apple have excellent competitive positions in their respective industries. However, Apple's return on equity is 149.81%, significantly higher than Google's 34.83%, highlighting Apple's higher efficiency in utilizing shareholder equity.

Both Apple and Google are excellent risk-return choices. One of the main risk factors for Apple investors is the company's reliance on the iPhone, which accounts for 47.40% of its revenue. Google, on the other hand, is highly dependent on its advertising business, which accounts for 73.98% of its revenue. In terms of revenue diversification, Apple is the better choice compared to Google.

However, it is worth noting that Google currently has a stronger cash position (951.5 billion dollars compared to Apple's 553.7 billion dollars) and a significantly lower total debt-to-equity ratio (11.48% compared to Apple's 154.49%), making Google's investment risk slightly lower than Apple's.

Google's lower valuation and higher growth metrics indicate that the company has greater upside potential and lower downside risk compared to Apple, further supporting the view that Google currently has a more attractive risk-return profile.

While Apple has a wider economic moat than Google, Google is currently the slightly better choice in terms of risk-return. This is primarily due to Google's lower valuation (FWD 23.65 compared to Apple's 32.47) and its superior growth metrics (Google's diluted earnings per share 3-year [CAGR] is 20.40%, compared to Apple's 2.85%).

Given the strong financial positions, significant competitive advantages, and optimistic growth prospects of both Apple and Google, it is recommended to increase investments in these two companies within a diversified portfolio.