Following earnings growth of 68%, after hours trading of AAPL at $300/share shows a P/E of 19.8. The company added over $5 billion in cash for a total of $51 billion or $52.9/share.
Excluding cash from the price of $300 leads to an enterprise value of $249 and a trailing twelve months earnings of $15.15. The ex-cash P/E is therefore 16.44.
P/E/trailing Growth is 0.29.
My guess is that this is keeping AAPL cheaper than the S&P 500 on both P/E and P/E/G.
One of the most hotly debated subjects in the mobile phone business is the importance of market share. It’s also a topic of lore in the PC industry. Briefly the two arguments are:
- Market share matters more because it drives network effects which ultimately drive competition out of the market, creating the opportunity for monopoly rents.
- Profit share matters more because profit is the only fuel that can drive innovation. Any macro downturn or shift in strategy can cause a company to cease investing in unprofitable projects.
The old disruptor’s adage: “Be hungry for profits and patient for growth” is challenged by the equally disruptive: “Grow share with lower prices in exchange for new revenue sources.”
There are many rich anecdotes to support each strategy, but how about some data? Continue reading