Apple, with its $50 a share in cash, could earn as much as $17 to $20 a share in 2011, which means the stock is trading at a cheap 12.5 times next year’s earnings. Cramer said even if Apple hits his $300 target, the stock will still be cheap trading at just 15 times earnings.
“That’s less than almost every single growth stock I follow,” Cramer said, “and even less than the S&P 500’s multiple.”
via Jim Cramer Predicts Apple Inc. (NASDAQ:AAPL) will hit $300 a Share | Madd Money.
S&P forecasts the S&P 500 average P/E for 6/30/2010 at 22.57.
Readers of this blog may recall that I noticed Apple’s discounted valuation several times.
Erick Maronak, manager of the Victory Large Cap Growth Fund, says Apple is the best-run company in the U.S.
I would add it’s also almost the biggest and at the same time least understood. A lack of understanding is reflected in a high risk rating, which is itself shown in the company’s Beta.
All told, that makes Apple the fourth largest market cap in the US with the volatility and apparent risk of a startup.
Asymmetries of information don’t get better than this.
Apple, Little Understood, Is Best-Run Company | Mutual Fund Center | Financial Articles & Investing News | TheStreet.com
Of all the world’s companies, Apple ranks as the 11th most valuable. As a technology company its market capitalization is second only to Microsoft.
Of the top 20 largest companies, all of which are above $150 billion in market cap (listed in graph above), Apple has the highest volume of trading as measured by dollar value (average volume multiplied by last share price is $5.2 billion per day–see graph). In fact, it’s more than twice as popular as a traded equity than the next highest, Google and 2.6 times as popular among traders as Microsoft.
This trading volume might also be reflected in its beta (the correlation of price with the market with 1 meaning perfect correlation). Apple’s Beta is 1.59, nearly the highest of the super-large caps and the highest by far of the tech large caps.
Surely, this confirms that Apple is not only huge but hugely popular and highly visible among investors. Suggestions that its current discounted value is due to obscurity among IT buyers translating to obscurity among investors does not wash.
Source: Google Finance
On Christmas Eve 2007 to be precise. That’s when the Enterprise Value/share was $181.5. These days it’s around $150. The Enterprise Value (EV) measures the value of future cash flows excluding current assets and is a better indicator of the potential of a company than its current overall value.
As you can see in the graph above, the cash per share (in green) has grown to $43 while back in late 2007 it was less than half that. As a result, although the market value for Apple peaked at $215 on 19th January this year (the blue line), the EV/share was only about $178 (the red line), below the all-time-high in 2007.
As Apple’s cash continues to grow, the gap between EV and MV will also grow. If the MV remains low (as the P/E is indicating) then the Enterprise Value, i.e. the net present value value of future cash flows, drops.
Did Apple’s prospects peak in 2007–six months after the iPhone was first launched–or is the current valuation still a function of sentiment of the overall economy, independent of the company’s fundamentals?
Apple’s profit of $3.38 billion for CQ4 was slightly more than 10 times bigger than Dell’s $334 million on nearly equal Revenues of 15.7 billion and 14.9 billion.
In other words, Apple kept about 20% of its income while Dell kept 2%. Also worth noting is that Dell’s gross margin onconsumer PCs was 0.2% while Apple’s Mac margin (mostly sold to consumers) was around 28%. So on consumer PCs Apple’s margin was 140 times higher.
It should not be a surprise then that Apple is worth 6.5 times Dell.
To recover some of its margins Dell is rumored to be readying its iPad competitor.
I can’t wait.