Why Apple is a value stock

“Apple (AAPL) is a phenomenal growth story and its stock has rewarded the investors well over the last few years,” Shailesh Kumar writes for Seeking Alpha. “But it appears that even with its Market Capitalization touching $330 B, and the stock having posted a 47% gain in the last 12 months, the shares are still undervalued.”

“The shares currently trade at a Price to Book of 4.89. This cannot be considered cheap if you are looking at asset based valuation measures,” Kumar writes. “However, as many tech companies, Apple has tremendous Asset leverage – it can create more shareholder value using fewer assets than companies in other industries.”

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Kumar writes, “The Price to Earnings ratio is a much more reasonable 14.5. If you discount the excess cash that Apple has sitting on its books (I discounted all of it except $2 B, which I think is a reasonable amount for Apple to have to support its maintenance operational expenses), the P/E ratio falls to 13.36. This is a respectable P/E for a typical manufacturing company, but Apple is not that typical.”

Read more in the full article here.
 

[Thanks to MacDailyNews Reader “David E.” for the heads up.]

24 Comments

  1. Unfortunately, anyone that bought this “value” stock in February, 2011 will now have zero gains and will likely lose their money by the end of the year if this “value” stock continues to nosedive. I’m sure there’s nothing more valued than a stock where the company is basically printing money and growing like wildfire yet shareholders are getting nothing for their investment.

    1. Timing is everything, and in wallstreet the #1 priority is not to make money but to not lose money. With aapl your chances of losing money are close to 0 in the long run, and thats what makes it a great stock.

    2. For starters unWiseinvesyor, true investment should be measured by long term results not by year end gains.

      Most true Apple investors are rewarded handsomely for their conviction and investment in this company that has no match in everything it does.

    3. Relax and be patient. You cannot predict short term moves, but in the long term, fundamentals will win the day. Also, if you bought back in Feb 2011, you bought at the top of a range. Now the former top is at the bottom of a range (and you had the opportunity to sell out at over $400 per share, btw if you were looking to get out). AAPL earnings in the next quarter will move the needle yet again.

      Hang in there. The company is strong. That is unless you think the iPad is a fad, Wintel will resurge, and the iPhone will start bleeding unsatisfied customers to Android and Win 7/8 phones? Now, that would change the fundamentals.

    4. Warren Buffett once said “IF you’re going to be buying hamburger, do you want the price to be high or low?”

      If the price is low now, and it is, then that’s great for people who want to buy.

      Anyone who already bought, say, a couple years ago, is not complaining.

      If your time horizon is less than a couple years, you’re a speculator, not an investor.

      If you’re a speculator, Apple’s movements give you many opportunities.

      So, I think TWI, you lost on all counts.

    1. I don’t use this kind of apps, because (i) they waste screen real estate, more than the web page (after a double tap); (ii) new functionality usually arrives first on the web page, while the app may just remain in a neglected state.

  2. For a short term investor, Apple is a risky bet. Especially if you get spooked easily. If you are a long term investor, it’s as close to a sure thing as you can get.

  3. Assuming next quarter’s results coming in at the usual beyond expectation numbers, Apple’s trading at a current fiscal year PE of 12.7, a calendar year PE of 11±. Add China to next year’s mix, extrapolate from previous growth rates, and you get a conservative PE of 8.9, at today’s prices, for fiscal 2012 earnings. Of course, as we know, Apple’s not Amazon, in that it exceeds, rather than disappoints, and its growth rate is much higher, but Apple’s current price could be fairly summed up as “stupid low{.

  4. If the liberals hadn’t used the so called banking crsis for maximum effect to push their monkey boy into the white house, Apple stock would be 500 now and the world wouldn’t be stck in recession.

    Thanks a$$jerks

    1. If the “conservatives” had pushed their monkey boy into the White House, we’d still be in exact the same situation we’re in today.

      Including you blaming the “liberals” for Apple’s share price* and the recession.

      (*and speaking of it, holy shit. $356? What just happened?)

  5. was the beginning of a good thread until Ubera$$jerk showed his pimply face, go back to school.
    leave the thinking to “the rest of us”—and Apple (one of the most liberal corporations in the known universe).

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