AAPL Stock: 110.38 ( + 0.8 )

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Apple\'s stock \"strong\", outperforms averages

updated 10:30 am EST, Wed November 2, 2005

Apple\'s stock \"strong\"

Apple's stock was dubbed strong by Dan Sullivan, editor of The Chartist, because it for the past year. The company's stock is up 119.6 percent over the last 12 months. Last November Apple held its gains after a more than 100 percent run in the previous 12 months, and rallied with the market in the fourth quarter of 2004, according to a report from The company climbed up to $45 in February, slipped down in April and May of 2005, and then retook its 50-day average in July. Apple began hitting new highs again in August, and earned $1.43 billion on sales of $13.93 billion in the past four quarters, according to the report. Revenue in the most recent quarter surged 56.5 percent, while earnings per share of $1.56 were 305 percent higher than the same quarter last year. "Apple has a market capitalization of $47 billion, zero debt and $9.95 per share in cash on the books. It currently trades for 37 times trailing earnings and 32.3 times analysts' estimates of $1.78 per share in earnings for the year ended September 2006."

by MacNN Staff





  1. sagaces

    Joined: Dec 1969


    Apple vs. Dell

    This morning's Austin American-Statesman had a diagram showing Dell's stock performance for the last couple of years, pointing out that Dell's stock is at, if I'm not mistaken, a two year low. It would have been interesting (amusing?) if that same chart also showed Apple's stock performance for the same period.

  1. iolaire

    Joined: Dec 1969


    Cash on Books Increasing

    From a computer buyer perspective - i.e. one who wants Apple to be able to produce computers regardless of stock price, I'm glad to see that the cash on books is still increasing.

    Pre stock split, back when the stock was about $14 ($7 in today's terms) I remember the cash on hand was $12 or $14 per share. With it now at $9.95 per share it would be valued at ~$20 in pre split terms.

    There will be times when the company is not generating such strong profits and it is good to see that they are stocking more cash away during the good times.

  1. jimothy

    Joined: Dec 1969


    Re: Apple vs. Dell

    Here is a chart comparing the stock price of AAPL vs. DELL for the past two years:

    Clearly, Michael Dell should close the shop and return the money to the shareholders.

  1. climacs

    Joined: Dec 1969


    not too long ago

    you could have bought AAPL for $45... in fact right after they announced quarterly earnings it dipped down to that level...

  1. EricN

    Joined: Dec 1969


    overvaluation question

    "It currently trades for 37 times trailing earnings..."

    What the heck does this mean? Apple is doing great things. I know that. You know that. Only stupid people don't know that.

    But how do we know if the stock is overvalued or not?

  1. jimothy

    Joined: Dec 1969


    re: overvaluation questio

    "37 times trailing earnings" means...

    Take the earnings over the last 4-quarters, divide it by the number of outstanding shares. This gives you the earnings per share (EPS) ($1.56, according to Yahoo! finance). Now, divide the current stock price ($59.95 at today's market close) by the EPS, and you get the price/earnings (P/E) ratio, which, with today's movement, is over 38.

    You'll also hear about "forward P/E", which is the same thing, except using the expected earnings for the next fiscal year instead of the actual earnings from the previous four quarters. According the Yahoo!, this is around 29 (indicating Apple's earnings are expected to increase).

    So what does this have to do with over/undervalued? Well, say the average P/E ratio for a group of stocks (perhaps companies in the computer industry, or those in a broader market index, like the S&P 500) is 15. By one measure, a company with a P/E under 15 would be considered undervalued (meaning it's share price is less than what it's earnings suggest it should be), or overvalued (meaning the opposite).

    A fast growing company may justify its overvaluation, in that it's earnings are expected to increase, eventually bringing the P/E ratio to around the level of its peers. So, based strictly on P/E, Apple would have (eventually) to earn twice what it's expected to earn next fiscal year (which is itself higher than what it earned this last year) in get a P/E ratio of 15. And that's if the share price didn't increase at all.

    So, based on a P/E analysis, it's easy to see why some consider Apple overvalued. After all, doubling earnings is not a minor accomplishment for an established company. But the P/E ratio is only one way to calculate "fair value," and Apple has shown some very strong and surprising growth lately.

    The question is if they can extend that growth long enough and fast enough to justify not just the current stock price, but further upside in the stock price. The iPod alone can't do that, so Apple will have to sell significantly larger numbers of Macs (think, doubling their market share) while continuing to grow the music side of their business. Apparently, the market thinks they can and will do that, thus the lofty stock price.

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