Apple Stock Has Served Investors Massive Gains

With so much negative coverage surrounding Apple (NASDAQ: AAPL  ) stock after its well-documented fall from $705 per share to levels below $400, it's easy to assume that Apple has failed to reward investors, or performed in a mediocre fashion at best. In fact, for shortsighted traders, this view may be their honest opinion. But for Foolish investors, this couldn't be further from the truth. Let's zoom out and give Apple the credit it deserves.

New 52-week highs
Zooming out only 12 months, the performance isn't great. But it's not bad, either.

Just this week, Apple finally hit a new 52-week high. So even in the past year, Apple stock has held its own. Sure, it didn't outperform the market -- but it did give investors a small gain.

AAPL Chart

AAPL data by YCharts

But even after reaching a 52-week highs, the majority of Apple analysts still hold a buy rating on the stock -- in fact, 18 of the 53 analysts polled by Thomson Reuters rate Apple a strong buy. So, according to consensus analyst opinion, Apple is still undervalued even after its massive 45% gain from levels below $400. And for long-term Apple shareholders who capitalized on the opportunity to add to their position when the stock tumbled, their return with Apple stock may have fared very well in 2013.

Since Steve Jobs passed
What about Apple's performance since Steve Jobs passed? Many people questioned the company's prospects after his death. After all, he was the revolutionary leader who brought the world the Mac, iPod, iPhone, and iPad.

As it turns out, Apple had done considerably well since Jobs' death. In fact, for those who claimed Apple had no hope after Jobs passed and stood by their word by shorting or selling the stock, they missed out big time. Since his death, Apple stock is up a whopping 50%, outperforming the Dow Jones Industrial Average return of 45% during the same period.

A Foolish look
For Foolish investors it is larger time horizons, like five years or greater, that really tell the story of a company's performance. After all, in the short term a stock can move in any direction. But, over the long haul, the value of a stock tends to follow the underlying fundamentals.

So how did Apple stock score when viewed on a Foolish time horizon? I'd say it earned an A-plus. Over the past five years, Apple stock is up more than 500%. Just when Apple critics thought Apple was at the top of the world with the help of iPod domination, Apple introduced the iPhone in 2007. The iPhone, followed by the iPad, sent Apple stock to levels analysts could have never imagined.

Apple tomorrow
Where is Apple headed in the next five years? Investors shouldn't expect another 500% gain, but the horizon looks good.

As the world's most valuable publicly traded company and with profit margins that seem to have maxed out, Apple will have to turn to its cash hoard and its healthy cash flow to reward investors. In March 2012, Apple did just that, initiating a dividend and a share repurchase program. Then, in April of this year, the company increased its dividend by 15% and boosted its share repurchase program from $10 billion to $60 billion. Even after these increases, however, Apple still has plenty of cash to draw from for more share repurchases and dividend increases in the future -- $148.6 billion on the balance sheet and a massive stream of earnings. To put Apple's cash flow in perspective, the company is paying out only 29% of its trailing-12-month earnings in dividends.

So will Apple reward investors over the next five years? I think so. Equipped with the world's most valuable brand and an impressive stream of cash, the foundation Steve Jobs built looks as sustainable as ever. And given Apple's conservative valuation of just 14 times earnings, the stock price offers investors an enticing entry point into the cash cow.

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