Why I Finally Added Apple Stock to My Portfoliohttp://www.fool.com/investing/general/2013/04/15/why-i-finally-added-apple-stock-to-my-portfolio.aspx Steve Symington
April 16, 2013
Over the past six months, to say Apple (NASDAQ: AAPL) stock has fallen from grace seems a massive understatement. To be sure, take a look at Apple's dismal performance next to the respectable gains offered by the S&P 500 over the same interval:
Ouch! That's nearly 43% of frustrating underperformance turned in by a company, which, curiously enough, managed to earn nearly $42 billion (yep, with a "b") on almost $165 billion in revenue during 2012 alone.
Why buy now?
Even so, we should also recognize short-term fluctuations are wildly unpredictable. So let's zoom out a little, shall we?
Take a look at what Apple has done over the past five years relative to the S&P 500:
Sure, the index didn't do half bad by gaining nearly 34% over the last half decade, but the fact remains that Apple has absolutely crushed it over the longer term by nearly tripling investors' money over the same period.
Even still, Apple's share price to date doesn't mesh with its ever-increasing levels of profitability. For example, check out how quickly the company has grown its revenue, book value, and diluted earnings per share since then:
So what's the problem? For one, investors certainly didn't take too kindly to Apple's earnings per share leveling off toward the end of the above chart, and that largely resulted in the aforementioned mass exodus from the stock of a company that could formerly do no wrong. This should have come as little surprise, though, when we consider the mathematical impossibility of any company indefinitely keeping up that breakneck pace of growth.
However, thanks to the market's manic nature, I'm convinced the sell-off in Apple stock over the past several months has been ridiculously overblown. As it stands, shares of Apple currently trade for a mouth-watering 9.7 times trailing earnings and just 8.7 times forward estimates. In addition, the company boasted an incredible $137 billion in cash and investments on its balance sheet with no debt at the end of the most recent quarter. If that weren't enough, Apple shareholders can also look forward to collecting a 2.5% dividend, which amounts to a payout ratio of just 12%.