Apple vs. Exxon: Forget Size. Which One Is Better?

You�ve likely seen stories recently about how Apple (NASDAQ:AAPL) is now larger than Exxon (NYSE:XOM) — at least measured by market capitalization, a simple calculation that multiplies share price times shares outstanding. As of this writing, Apple has a market cap of $440 billion, while Exxon is around $405 billion.

But what investors should care about isn�t a battle over size. The right question to ask is: �Which stock is a better buy?�

Well, both picks have a lot going for them — mammoth reach, dominance in their industry and huge brands. But let�s see how they compare in several key metrics to get beyond which one is biggest and decide which one is best for your portfolio.

Revenue: Exxon

No doubt, Apple is a sales machine. Revenue has exploded in the last five years, to about $108 billion in fiscal 2011. Few companies are in the $100 billion sales club. Automakers like General Motors (NYSE:GM) and financial stocks like Warren Buffett�s Berkshire Hathaway (NYSE:BRK.B) largely 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 may sell a lot, but Exxon sells a lot more.

Revenue Growth: Apple

Even though Exxon leads now, there�s no guarantee that it will always be 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 last five years — from around $24 billion in fiscal 2007 — despite the Great Recession, it�s hard to ignore Apple�s momentum. Exxon has been on the rise, too, but the truth is its $450 billion in revenue last year wasn�t even its best ever. The total still lags the $477 billion Exxon tallied from record oil prices in 2008.

Profits: 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 fiscal year. That�s a staggering amount. However, it doesn�t even come close to Exxon. It has recorded five of the seven largest corporate profits in U.S. history — with its fiscal 2011 total of $41 billion almost doubling Apple.

Profit Growth: Apple

Again, though, we must return to the history of these companies to see which has more growth. For instance, despite the $41 billion in profits for the 2011 fiscal year, Exxon�s top tally was $45 billion in 2008. Sure, profits have been 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 — from $13 billion in fiscal 2008 to $44 billion in fiscal 2011. Exxon may be regaining speed, but Apple never slowed down.

Valuation: Tied

Let�s look past growth now and talk about value. When you look at Apple, it�s actually quite a good value — with a forward price-earnings ratio of around 11.5 based on 2012 forecasts. The average for S&P 500 components 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, however, is not to get too caught up in the headline numbers. After all, P/E ratios can vary widely from industry to industry. Compared to peers, Exxon isn�t as impressive. Chevron (NYSE:CVX), for instance, has a forward P/E of 7.9. Apple doesn�t exactly have peers, but Research In Motion (NASDAQ:RIMM) has a rock-bottom P/E of about 5.9. Enough said.

So is Exxon or Apple a better value? It�s hard to say since the comparison is (pardon the pun) apples to oranges. But both appear to be good values, even if it�s slippery to determine which one is the better value.

Cash and Debt: Apple

Exxon is one of the strongest borrowers on Wall Street, with the elite AAA rating from Standard & Poor�s. That�s because it holds only $16.7 billion in total debt backed up by $323 billion in assets. Exxon has $11 billion in cash and short-term investments, and $35.3 billion in long-term investments. Impressive, right?

Well, consider this: Apple has zero debt — with a staggering $30.1 billion in cash and another $67.4 billion in long-term investments. Exxon may get great rates on its corporate bonds, but Apple is in the enviable position of never needing to borrow a dime because of its massive bank account.

Brand Power: Apple

Let�s look beyond sales and profits for a moment. How does Exxon make money? By exploring for oil, refining it and selling gasoline (among other products). It�s a big business because energy is the lifeblood of the global economy. However, many consumers get sick and tired of feeling the pain at the pump — and blame Big Oil when gasoline prices rise. Throw in talk about fossil fuels contributing to global warming, and it appears Exxon isn�t a frontrunner for popularity contests on Main Street.

Contrast that to Apple, which sees long lines of customers eager to buy as soon as each new iPhone launches. People just can�t wait to give the company their money. Apple isn�t without bad press, of course — the fact that it gets filthy rich from cheap Chinese labor doesn�t sit well with some Americans. But by and large, Apple is a much more powerful brand than Exxon. Gas is a necessity we have to purchase whether we like it or not. The iPhone is an �insanely great� gadget that everyone covets.

Share Momentum: Apple

Here�s where we get to what investors really want to know: What�s Apple or Exxon stock going to do for their portfolio? Looking back over the past few years, Exxon stock can�t hold a candle to Apple. XOM did manage an impressive 50% gain from its 2010 low in July to its spring 2011 peak, outperforming Apple�s 35% gain in the same period.

But other than cherry-picking that period, Apple has trounced Exxon. So far in 2012, Apple is up 17% while Exxon is flat. In the last year, AAPL is up 33% vs. just 3% for Exxon. In the past five years, Apple is up 460% to Exxon�s 12%. Past performance doesn�t guarantee future returns, but the disparity here is very dramatic.

Verdict: Apple

Frankly, the discussion over whether Apple or Exxon is bigger is a waste of time. Market capitalization doesn�t reflect the fact that Exxon remains a significantly larger company measured by revenue or profits.

And fundamentally, the real question for investors has nothing to do with size. Plenty of small stocks are red-hot buys, and plenty of big companies are duds. The challenge is finding a company that�s on the way up, expanding its sales and profits.

Apple has that growth. It also has a great brand, a stock with a history of outperformance and a valuation that hints AAPL is bargain.

Jeff Reeves is the editor of InvestorPlace.com. Write him at editor@investorplace??.com, follow him on Twitter via @JeffReevesIP and become a fan of InvestorPlace on Facebook. Jeff Reeves holds a position in Alcoa, but no other publicly traded stocks.