“Valuation is one of the most important aspects to consider when making investment decisions, and Apple stock looks remarkably attractive from that point of view,” Andrés Cardenal writes for The Motley Fool. “Apple stock is trading at notoriously cheap levels. The company has carried a price-to-earnings ratio of 12.5 times earnings over the last 12 months. When using earnings estimates for the current fiscal year, meaning the 12-month period ending in September 2015, Apple is trading at a P/E ratio near 11.8. By comparison, the average company in the S&P 500 index is trading at a much higher P/E ratio — in the neighborhood of 18.4.”
“The main reason Apple stock is so cheap is arguably because Wall Street is expecting growth to slow down substantially as the smartphone market matures. Apple made nearly 63% of total revenue from the iPhone segment last quarter, and the industry seems to be moving beyond the rapid expansion phase. According to estimates by IDC, worldwide smartphone shipments are expected to grow 10.4% in 2015, a considerable deceleration versus a 27.5% increase in 2014,” Cardenal writes. “On the other hand, it’s important to keep in mind that Apple still has substantial room for market share gains on a global basis. Based on IDC’s calculations, Apple will own just 15.6% of the global smartphone market in 2015, and the company has been stealing market share away from the competition lately.”
“There is a considerable chance the company can do better than expected on the back of sustained iPhone strength and product innovation,” Cardenal writes. “If this happens, Apple stock could deliver huge gains for investors.”
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MacDailyNews Take: Even as it made Apple the world’s most valuable company, the market has never really understood Apple.