“the calculation of Peter Lynch Fair Value is very straightforward. It simply equals to the growth rate multiplied by its earnings. That is: Peter Lynch Fair Value = Earnings Growth Rate * Earnings,” GuruFocus writes. “Therefore, if a company grows its earnings 20% a year, to Peter Lynch, its fair valuation is 20 times its earnings.”
GuruFocus writes, “Apple has been able to grow its earnings per share at more than 60% a year, which is the result of tremendous revenue growth and margin expansion. Apple earned more than $40 a share for the trailing twelve months. If Apple is worth a P/E of its growth rate of 60, the stock would be worth more than $2400 a share. Of course, Peter Lynch would only be willing to pay a P/E of 20 for the companies that grow faster than 20% a year. In this case, Apple shares would be worth about $1000 a share to Peter Lynch. “
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