“David Trainer, president of New Constructs, a Nashville-based research firm, says that Apple Inc.’s level of profitability is not sustainable, and that the company’s return on invested capital suggests that the price of the stock should be somewhere around $240. That would be nearly a 50% decline from current levels,” Chuck Jaffe reports for MarketWatch.

“Appearing on the ‘Danger Zone’ segment of MoneyLife with Chuck Jaffe, Trainer – who prefaced his remarks by noting that Apple is great company and that he and his firm are dedicated users of its products – said that the company has had ‘extraordinarily high returns on invested capital,’” Jaffe reports. “Trainer said that if the company can maintain a 75% return on invested capital, ‘the stock’s worth about 295 bucks. If the return on invested capital drops closer to 50, the stock’s worth closer to 240 bucks, and I think that’s where it ought to be, or where it’s going to go eventually.’”

Jaffe reports, “Trainer, whose firm rates securities on a scale from very attractive to very dangerous, noted that Apple’s tremendous profitability keeps it with a ‘neutral’ rating, noting that ‘Apple looks really cheap – and this is where people are getting caught up – if you look through the rear-view mirror to where profits have been… but you have to realize they are on the back side of the mountain.’”

Read more in the full article here.