“Apple (AAPL) shareholders probably aren’t too happy with how the stock has performed over the past few months. After hitting an all time high of just over $700 per share in September it began a downward descent which continues today, most recently trading at $528.38, a decline of about 25%,” Bargain Bin Investing writes via Seeking Alpha.

MacDailyNews Note: AAPL is currently down another 4.39%, off $23.26, to $506.43.

“Determining how much Apple is worth requires you to project future earnings. And because Apple has grown by so much in such a short amount of time forecasting becomes very difficult. In 2008 Apple recorded $32 billion in revenue. In fiscal 2012, which ended in September, revenue sat at $156 billion, nearly a factor of 5 increase. During the same period, free cash flow rose from $8.4 billion to $41 billion, again nearly a factor of 5. Clearly this level of growth can’t continue forever,” BBI writes. “How much is Apple worth if it only grows at the rate of inflation, let’s say about 3%? This is, of course, outrageous compared to the average analyst estimate of about 20% annual earnings growth over the next 5 years. And in all likelihood Apple will grow much faster than my lowly 3% rate. But let’s see what the 3% scenario yields.”

BBI writes, “Apple has about $120 billion in cash and investments on the balance sheet and no debt. With 945 million diluted shares outstanding this amounts to $127 per share of cash. This means that the market is currently valuing all of Apple’s future cash flows at just a hair over $400 per share. Apple’s $41 billion free cash flow in 2012 equates to $43.4 per share. This puts the adjusted P/FCF (after backing out cash) at around 9.2… Apple doesn’t need to grow earnings at 20% per year to justify its valuation. It barely needs to do anything at all. As long as Apple can maintain its current earnings the stock is currently a steal.”

“If you believe that Apple can at least maintain current earnings levels going forward then the stock is an undeniable bargain at today’s prices. It seems to me that the pessimism has gotten to near-ridiculous levels,” BBI writes. “Apple doesn’t need to maintain the extreme growth rates of the past to be a good buy. The fact that analyst expectations are still quite high means that the stock could fall even further if the company misses those expectations. Of course, that would just make the opportunity even better.”

Read more in the full article here.