“The only explanation for the ridiculously low price to earnings ratio of Apple is that analysts are living in some sort of fairly tale,” Eric Whiteside writes for The Motley Fool. “Perhaps they have all taken a bite of Snow White’s apple and there are not any princes who wish to kiss them.”
“Apple is a company that manufactures much loved products and has an enviable history of coming up with innovative new products. Microsoft is a company whose products are mostly tolerated by their users and the company has a long history of developing products that are total flops,” Whiteside writes. “Apple makes products that people want to buy. People want to find alternatives to most Microsoft products. So why does Microsoft trade at a price to earnings ratio of 15.83 and Apple only trade at a P/E ratio of only 9.56?”
Whiteside writes, “Consider that Microsoft is expected to see 5 year earnings growth of 9.03% per year. While, Apple’s earnings are expected to grow at rate of 18.98% per year over the same period of time. How does a company with an expected annual earnings growth of 18.98% rate a P/E ratio of only 9.56? Shouldn’t Apple have at least the same P/E ratio as Microsoft? That would price Apple’s shares at well above its all-time high.”
Read more in the full article here.
[Thanks to MacDailyNews Readers “Fred Mertz,” “JES42,” and “Rainy Day” for the heads up.]