“Apple has a problem. The opposite of Facebook’s problem,” Nancy Miller writes for TIME Magazine. “It’s undervalued and likely to stay that way.”
“That’s pretty surprising given that, even after the death of its visionary leader Steve Jobs, Apple has continued on a path of unparalleled profitability,” Miller writes. “In the second quarter, earnings surged 94% to a record $11.6 billion — more than three times the annual revenues of Facebook last year and 11.6 times Facebook’s earnings.”
Miller writes, “Yet the stock price simply does not reflect that success. Yes, Apple shares are up 40% this year, even after losing some ground since April. And it is the biggest stock by market capitalization — more than $530 billion. But by at least one measure Apple looks to be significantly under-appreciated by the stock market. Its price-to-earnings ratio for 2012 is just under 14, which means its stock price is 14 times greater than its earnings per share. For comparison, consider that the average P/E for all the stocks on the S&P 500 — the stinkers as well as the stars – is 16. Facebook’s P/E is about 100, depending on how much it earns this year. Amazon’s is about 176.”
Much more in the full article here.