Is Apple a candidate for acquisition?

Apple’s ‘trailing twelve months’ earnings were $17.91 per share. Therefore the P/E ratio is now 18.2. Excluding cash, the P/E is at 14.7. However, that’s based on 2010 levels of earnings. Those earnings are increasing very quickly,” Horace Dediu reports for asymco. “To account for earnings and their growth, I developed the following chart which shows the P/E and P/E/trailing-Growth for the stock.”

“The P/E is fluctuating on either side of 20 but when considering trailing growth, comparable companies, the macroeconomic conditions and guidance the value of the company is reaching new lows,” Dediu reports. “Earnings were 75% higher in 2010 than the year before. So based on the growth, the rule-of-thumb ratio P/E/training Growth (P/E/tG) is 0.24. This ratio (where 1.0 is seen as ‘fair value’) is the lowest since July 2009, during the first months of recession recovery.”

Dediu reports, “Given the new low in valuation contrasted with optimism on behalf of many (including management), on some forums there is discussion about Apple becoming the target for a take-over. There is some perverse merit to this logic. With $64 in cash, $25/yr in earnings and 75% growth it’s so cheap that if credit were available, it would make a tempting candidate.”

Read more in the full article here.