In the past 20 years, Apple (AAPL -1.41%) has generated a total return of 26,720%. Investors won’t find many businesses that have put up this type of impressive long-term performance. It has come about thanks to strong financial gains as Apple has become one of the world’s most valuable enterprises.

As we look to the future, could buying this “Magnificent Seven” stock set you up for life?

What’s not to like?

Apple has been such a wildly successful investment in the past because it possesses some outstanding qualities. Investors need to understand what makes this business special.

For starters, Apple’s powerful brand can’t be overstated. Thanks to its longtime focus on catering to its customers’ needs and offering elegant hardware products with easy-to-use software, Apple has become a favorite among consumers. The company’s devices are some of the most popular on the planet.

Apple’s brand strength has helped the company remain incredibly relevant over the past couple of decades. And despite there being a ton of competition in the various industry verticals the business plays in, I have high confidence that Apple’s brand moat isn’t going to weaken anytime soon.

A strong and differentiated brand has allowed Apple to flex its pricing power. The company’s products collectively carry a gross margin of 36.3%. Apple can charge seemingly higher prices over time, yet still see robust demand.

Apple benefits from customer loyalty because of the powerful ecosystem it has created. Its broad suite of software and services, which themselves boast a stellar gross margin of 74%, essentially locks consumers in and discourages them from switching to rivals’ offerings.

Of course, any follower of this company knows just how much money it makes. Apple’s fiscal 2024 net income of $93.7 billion, which totaled 24% of revenue, would put it about on par with the GDPs of countries like Guatemala and Bulgaria.

Apple’s profitability and $50 billion net cash position allow it to return tremendous amounts of capital to shareholders. Last fiscal year, the business repurchased $95.9 billion of outstanding stock and paid out $15.2 billion in dividends.

Warren Buffett, the legendary investor who runs Berkshire Hathaway, certainly understands these favorable qualities that Apple possesses. That’s why he still has a sizable stake in the massive consumer technology enterprise, even after meaningfully trimming his position over the past year.

High expectations

Thanks to Apple’s ongoing market-thumping stock performance, its shares aren’t exactly trading at a compelling valuation that screams “bargain.” Investors can buy the stock at a price-to-earnings (P/E) ratio of 37. In the past decade, shares have averaged a P/E multiple of 22.

High expectations don’t provide a favorable setup for prospective investors. That argument is supported by the fact that Wall Street consensus analyst estimates call for earnings per share to rise at an annualized clip of 10.9% over the next three years. That outlook does not justify paying the current P/E ratio, even though this is one of the most outstanding companies out there.

For a business and stock to “set someone up for life,” I believe there has to be a chance that it can produce investment returns in excess of the broader market, as measured by the S&P 500 or the Nasdaq Composite Index, for a very long period. While Apple has undoubtedly been a fantastic moneymaker historically, I believe the future won’t be as good for shareholders, due mainly to its huge scale and expensive valuation. Therefore, I don’t think the stock can set new investors up for life.