Is Apple the Cheapest Stock in the Market?

Apple's (NASDAQ: AAPL  )  continuing share decline means that the company is now trading for about 11.6 times earnings, despite its massive growth rates over the past three, five, and 10 years. The company now falls into an exclusive club, valuation-wise. Of the nearly 2,000 U.S.-listed companies worth more than a billion dollars, only 16 have a P/E less than 15, and three-year compounded revenue growth of more than 50%.

Apple is one of those companies. Most impressively, it's worth more than $450 billion more than the next closest company on the list. Yet, Apple's sheer size demonstrates why the company can't be considered "cheap" purely based on past growth. If the company were to grow sales at a compounded growth rate less than half of their rate over the past five years -- 25% -- Apple would exit the half decade with more in total sales than massive retailer Wal-Mart sells today.

In the video below, senior technology analyst Eric Bleeker explains the uniqueness of Apple's valuation, and why he still considers it a better buy than big tech peers like Intel and Microsoft.

Apple is one of the fastest-growing companies across the past decade, but is now trading at a P/E below Microsoft. To answer whether Apple remains a buy. The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on both reasons to buy and reasons to sell Apple, and what opportunities are left for the company (and more importantly, your portfolio) going forward. To get instant access to his latest thinking on Apple, simply click here now.


Read/Post Comments (5) | Recommend This Article (7)

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  • Report this Comment On December 26, 2012, at 6:55 PM, kthor wrote:

    nope better Opportunity somewhere else

  • Report this Comment On December 26, 2012, at 7:24 PM, JohnCLeven wrote:

    There's a yes pile, a no pile, and a too tough to call pile. AAPL fits in the latter, IMO. AAPL has already revolutionized computers, music, phones, and tablets. Everyday AAPL's competitive advantage is under siege from hungry competitors in the fast changing tech industry. For AAPL to remain as dominant in 2018 as they are today, they will need to continue to churn out revolutionary products, year in and year out. Over the long term, the iphone 10 or ipad 6 probably won't bring in earnings like what AAPL is seeing today. Sure, AAPL could continue to grow at double digits over the next 5-10 years, but that's more speculating than investing. Compounding wealth over a lifetime isn't about how much you make when your right, but how much you lose when your wrong. AAPL has alot of downside if it's moat gets eaten away and it's virtually IMPOSSIBLE to predict what AAPL's going to be earning 5 yrs down the road. Therefore, it's better to throw AAPL in the too tough pile, and go with a more predictable company.

  • Report this Comment On December 26, 2012, at 8:36 PM, deasystems wrote:

    @JohnCLeven: "For AAPL to remain as dominant in 2018 as they are today, they will need to continue to churn out revolutionary products, year in and year out."

    Not at all.

    Even if it *never* released another revolutionary product, it would continue to show higher than average revenue and bottom line growth. And contrary to your assertion, there is no more predictable company than Apple, other than 100 year old utilities. Strangely enough, most of the latter enjoy a higher P/E than Apple. How stupid...

  • Report this Comment On December 26, 2012, at 11:30 PM, JohnCLeven wrote:

    I'll reluctantly agree to disagree on the "continuing to churn out new products comment", but as far as there being "no more predictable company than AAPL, other than 100 yr old utilities" ...that is utterly ridiculous. In fact, that is perhaps the most asinine comment i've ever heard on this site. (which is saying something)

    AAPL made about $5 a share in 2008, but NO ONE predicted they'd made $45 per share in 2012. An NO ONE will be able to come close to predicting what AAPL will make 5 yrs from now. Want to give it a shot?

    When it comes to investing, I don't think i've ever straight up told someone that they are wrong, but if you really think AAPL is more predictable than KO, CVS, or WMT...well than you have no business investing.

  • Report this Comment On December 27, 2012, at 10:11 AM, pondee619 wrote:

    "Sure, AAPL could continue to grow at double digits over the next 5-10 years, but that's more speculating than investing"

    And every portfolio needs a dose of speculation.

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