“Apple (AAPL) looks cheap from nearly every angle. At 13.5 times trailing earnings, Apple hasn’t been this inexpensive in at least a decade,” Richard Moroney writes for The Stock Advisors.
“The shares are trading 48% below their five-year average P/E ratio,” Moroney writes. “Shares also trade below five-year averages for price/sales (17% discount), enterprise ratio (34%), price/operating cash flow (62%), and price/book value (29%).”
Moroney writes, “The company has grown sales more than 30% in 10 straight quarters, and cash from operations rose 47% or more in each of the last eight quarters. Apple, notoriously tight with its money, holds more than $81 billion in net cash and marketable securities, or nearly $87 per share. We recommend that investors scoop up its shares on the cheap. Apple is a Focus List Buy.”
Read more in the full article here.
I’m not sure how Apple seems cheap at any angle. The whole sickening reality is that nobody seems to be buying Apple because it’s too expensive. Isn’t that why the stock hasn’t been rising? Analysts may not think the stock is expensive, but then again, they’re not the ones who have to pay the money to invest. Investors are the only ones that matter if they think the stock is too expensive, then they won’t buy it. Doesn’t that make any sort of sense?
Lots of analysts cover Apple and most of them have target prices higher than what the stock currently has. But that still doesn’t guarantee any returns for shareholders if everyone keeps their cash in their pockets. Apparently, most investors believe that Apple will disappoint on earnings and who wants to take that risk after spending a wad. Not many, I’m sure. Calling a blowout doesn’t make it so. I doubt that even an honest-to-goodness earnings blowout will move the stock up to any degree and I’m sure most investors feel the same way. Even if the stock gets back up to $420, it will leave many shareholders at break-even. Who would enjoy that?
Much of what you say could be pointed at Google’s share price (25% higher than Apple’s) although Google’s indicators are all lower than Apple’s — across the board. Seems strange that people are willing to risk at an even higher price-point for a company (doing well, but) trailing Apple in every measure.
Not sure how long you’ve been around this stock, but people have made the very same arguments since aapl was at $10.
The P/E angle isn’t “every” angle. There are many forces at work, from anxiety over Steve Jobs, to rules that prohibit certain funds from owning it. So even though we’ve been here before with AAPL, we’ve never quite been *here* before.
The same TOST analysis from 2005 looks very different when adjusted for PBAJ from 2011. Add to that HAM developments in emerging markets, TROUT forces in technology, and macroeconomics beyond AAPL control, and the simplicity of P/E becomes cloyingly obvious.
Not that everyone has to be Zaky with his COCO graphs and COD charts, God bless him, but you have to wonder if Moroney might have generated more heat than light had he conducted even a simple BACN analysis, with results expressed on little more than a PEAR chart.
… price per unit and it’s pretty darned expensive! Can’t argue with that. But … that isn’t how well-informed buyers measure the price of a stock.
Most well-informed buyers look at the Trailing Price/Earnings (P/E) to see how much a stock should cost. The higher that ratio, the more risk is involved with buying that stock. Most stocks have a P/E over 15 while Apple’s is lower.
The best informed buyers look at the Leading Price/Earnings. Unlike the Trailing, where the amounts are known, the Leading requires the buyer to GUESS how much earnings the company will see. Again, if Apple hits its own earnings target, much less the target predicted by analysts or that expected by the fans, Apple will offer an even lower P/E – suggesting even LESS risk and greater upside potential.
The simplest measure would be a basic look at the anticipated profits … are they rising or falling? Apple’s have been rising for … HOW long now? Figure in the anticipated new or updated products and you can guess if the stock will continue to rise, stabilize, or fall. This is the measure most subject to error and emotion.
It doesn’t matter.
The MOST conservative yard stick suggests that the stock is under-priced with little risk and a long way to rise.
It makes sense if those investors were rational. However, based on established fundamental metrics, AAPL is cheap. The market is irrational.
In order to satisfy shareholders’ thirst for a dividend, Apple would be smart to manage and invest its huge hoard of cash by buying a bank. Instead of letting this cash lying idle and earning nothing, having one own bank would be a wonderful way for Apple to have its cake and eat it too. Profits earned from investment of this cash could be distributed as dividends to shareholders every year, with the caveat that shareholders should hold onto their shares for at least a year. Those who wish to speculate their shares on short-term profits would not be entitled to this dividend. In this way Apple would not need to dilute its principal capital.
Never has there been a better time for Apple to enter into another line of business where the banking industry is at a point of lethargy. A bank if managed well is always a profitable business. Wall Street’s banks have deviated from the fundamental principles of banking and have gone haywire giving bad advice and chasing after fools’ gold for themselves. Apple will have another stab in changing another critical industry. Wall Street’s banks are the old grabby, money-grabbing cabalistic Mafia school that need to be taught some innovative lessons by Apple. Apple should attract the best minds in the industry and innovate.
> Instead of letting this cash lying idle and earning nothing, having one own bank would be a wonderful way for Apple to have its cake and eat it too.
“Earning nothing.” What…? You think Apple as $80 billion worth of $20 bills stuffed in Tim Cook’s mattress?
I’m sure Apple has the money invested in the best possible short-term securities. If it earns 0.5% interest, $80 billion in “cash” is $400 million in free risk-free profit… $100 million added to Apple’s bottom line every quarter.
Apple main business is to make “things,” not offer services. Apple certainly does offer services, but they are intended to make Apple hardware more valuable and profitable. Apple buy a bank? Please… Apple is more likely to buy a car company and start making podcars.
Apple has been rising.. And is up $10 today
wait… what? without a dividend?? but… studies have shown that this is impossible.
Give it a rest already. Whining daily won’t help the cause.
This is so easy to figure out that I am in awe of how silly the discussion is. Apple IS worth much more . . . obviously. But the stock is going to stay down until investors can see evidence that the post Jobs era will continue the flow of innovative products and market changing ideas. Of course it will and then the stock will make a big run. Speculators are buying now . . . the herd of investors will make the run when the cloud of doubt has been lifted . . . even though seasoned apple investors know it is a bargain right now.
if studies showing that non dividend funds have already saturated their allowable allocations of aapl are true where is the new investing money going to come from?
Income is skyrocketing but the P.E compression shows stock interest (i.e buyers) is not growing in step with income gain.
most aapl is held by big funds. The market cap is so huge now that it’s going to take a lot of investing to move aapl up. Small investors ain’t going to do it. Even some small investors like pensioners want dividends (they don’t want to sell their stock) so they are not going to buy aapl.
It has been suggested that if aapl gave dividends it will open up vast markets as dividend funds will be allowed to buy them and it will also attract individual dividend investors.
also right now the only way to get cash from aapl is to SELL the stock which isn’t good for the share price. Is it good that hedge funds liquidate millions of $ of appl to distribute to their investors?
those who hate the idea of dividends don’t flame me but just tell me where the new investing money is going to come in to push aapl (the biggest market cap co. in the world) up. maybe I missed something or the studies of saturation (which is in step with the P.E compression) are wrong.
You’ve made that argument, but from a larger perspective, if you view AAPL as part of BUN, and view its value as part of the world economy, $350 billion market cap is trivial, i.e. $350 billion OF $30,000,000 billion BUN world economy.
With increasing world resources allocated for computing, how much of $30,000,000 billion could the world’s preeminent technology company command?
The stock has often dipped in the last few trading days of the year. I plan to buy some late next week.