This momentous occasion has been a long time coming, but Apple (NASDAQ:AAPL) officially crossed the threshold ($207.04 per share) that puts its total market cap into 13-digit territory, becoming the first U.S. company valued at $1 trillion. Technically, China's PetroChina was the first company in the world to briefly hit a $1 trillion market cap back in 2007 before losing roughly 80% of its value since.

Amazon.com had been closing the gap in recent years, with the e-commerce giant's stock posting strong gains as it continues to grow and expand into more and more markets, but Apple's strong fiscal third-quarter earnings release earlier this week helped propel the Mac maker's shares higher, as investors cheered strong guidance and accelerating revenue growth.

AAPL Market Cap Chart

AAPL Market Cap data by YCharts.

Cheap at $1 trillion

While $1 trillion in market valuation is an awful lot of money, it's worth noting that Apple remains incredibly cheap relative to its earnings power. The Mac maker has long traded at a discount to the S&P 500, and still does. Here's how Apple's valuation metrics compare to the broader market as well as some large tech peers.

Company or Index

P/E Ratio

P/S Ratio

S&P 500

24.3

2.2

Apple

17.5

3.7

Amazon.com

249.7

3.2

Alphabet

33.1

6.9

Facebook

23.7

10.3

Microsoft

28.1

6.5

Data sources: Multpl.com and Reuters.

Relative to its earnings power, Apple is the cheapest among its peers by a meaningful margin.

Tim Cook holding an iPhone in front of Apple employees

CEO Tim Cook holding the billionth iPhone. Image source: Apple.

How buybacks affect Apple's market cap

Incredibly, Apple has repurchased a mind-boggling $219.6 billion worth of its stock since kicking off its capital return program nearly six years ago. These repurchase activities have significantly accelerated in recent quarters following tax reform.

Chart showing cumulative share repurchases

Data source: SEC filings. Chart by author. Calendar quarters shown.

These buybacks have been conducted at various share prices over the years, but the company has now retired over (split-adjusted) 1.7 billion shares outstanding relative to its peak of shares outstanding in 2013.

AAPL Shares Outstanding Chart

AAPL Shares Outstanding data by YCharts.

At current prices, those 1.7 billion shares would be worth $360 billion. Of course, it's not that simple. Apple's buybacks are so massive that the repurchases are highly accretive to earnings, allowing net income to be distributed across fewer shares and allowing EPS growth to outpace net income growth. That helps boost Apple's stock price.

So there are opposing forces at play regarding how buybacks affect Apple's market cap: Buying back shares reduces its market cap by decreasing the number of shares outstanding, but the resulting earnings accretion helps drive prices higher.

While impressive, the reality is that a $1 trillion market cap is still a somewhat arbitrary milestone that has little bearing on the company's underlying fundamentals. Apple is the most profitable company on Earth, and long-term shareholders are getting increasingly bigger cuts of those profits.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Teresa Kersten is an employee of LinkedIn and is a member of The Motley Fool's board of directors. LinkedIn is owned by Microsoft. Evan Niu, CFA owns shares of Apple and FB. The Motley Fool owns shares of and recommends GOOG, GOOGL, AMZN, Apple, and FB. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.