“Legendary mutual fund manager Peter Lynch made his fame by generating outsized returns investing in growth companies. He is willing to pay up for faster growing companies,” GuruFocus writes for Forbes. “He famously said that he would rather pay a P/E of 20 for companies that grow 20% than P/E of 10 for companies that grow at 10% a year.”
“the calculation of Peter Lynch Fair Value is very straightforward. It simply equals to the growth rate multiplied by its earnings. That is: Peter Lynch Fair Value = Earnings Growth Rate * Earnings,” GuruFocus writes. “Therefore, if a company grows its earnings 20% a year, to Peter Lynch, its fair valuation is 20 times its earnings.”
GuruFocus writes, “Apple has been able to grow its earnings per share at more than 60% a year, which is the result of tremendous revenue growth and margin expansion. Apple earned more than $40 a share for the trailing twelve months. If Apple is worth a P/E of its growth rate of 60, the stock would be worth more than $2400 a share. Of course, Peter Lynch would only be willing to pay a P/E of 20 for the companies that grow faster than 20% a year. In this case, Apple shares would be worth about $1000 a share to Peter Lynch. ”
Read more in the full article here.
Make it so…………..
This is a bullshit story. You could do the same kind of calculation and say that Warren Buffett would buy AAPL … but he said that he’s not interest in tech stocks and AAPL isn’t in his portfolio.
Pay UP!
Engage!
Mr. Lynch, for as much money as he made for me in the past, is underestimating things.
See http://www.asymco.com/2012/10/04/using-capital-expenditures-to-predict-apples-share-price/ for some rational analysis of why AAPL will greatly exceed $100 in hte not too distant future.
Or he may be conservative. Either way, I respect Peter Lynch’s thoughts. As he said so well in his books on investing, the true price of a stock will eventually catch up to its earnings. He is one of the best investing minds around.
Also see Andy Zacky’s excellent article in Apple’s true value in his smackdown on Appme bear/short Doug Kass, and why $2,000 is indeed possible:
http://bullishcross.com/2012/10/apple-1000-why-doug-kass-will-miss-the-next-50-move/?utm_medium=referral&utm_source=pulsenews
Okay, I’ll buy a million shares at $660 and sell them to him for a nice profit at $990. That way he’ll also make $10 per share.
Not if the stock keeps dropping at 2.1 percent everyday for no FRICKING REASON!!!
Thats how the market has always treated Apple. Thats why Its a good idea to sell 25% of your position after a big run. If you have some powder dry right now your sitting pretty.