Shares of Apple (AAPL 3.09%) have performed exceptionally well in 2019, rising 23% year to date. This sharp gain comes despite the stock's recent pullback amid U.S.-China trade war concerns. With such strong performance so far this year, have investors who have been sitting on the sidelines missed the opportunity to make money from Apple stock?
While Apple sure isn't the bargain it was about six months ago, the overall risk-reward profile for the tech giant's stock continues to look compelling.
Sure, Apple may have a staggering $886 billion market capitalization. But the company has the fundamentals to support it. For instance, on Apple's $258 billion in trailing-12-month revenue, the company brought in a whopping $60 billion in free cash flow.
Strong fundamentals are also evident across Apple's business segments. Though trailing-12-month iPhone revenue is down 2% year over year, every other segment is growing. iPad and Mac revenue over the past trailing 12 months are up 4% and 1% year over year, respectively, and Apple's second-largest segment (following behind iPhone) -- services -- saw revenue rise 23% year over year over the same time frame. Meanwhile, Apple's smallest segment -- wearables, home, and accessories -- is serving up some promising growth, with trailing-12-month revenue jumping 33% year over year.
This well-rounded growth across Apple's product segments translates to 5% year-over-year growth in the tech giant's consolidated revenue. While a single-digit top-line growth rate may not be anything for investors to jump out of their seats for, growth could accelerate after the company finishes lapping year-ago comparisons from exceptionally strong iPhone X sales in fiscal 2018.
Further, Apple's fast-growing services business will likely have an increasingly positive impact on the tech company's consolidated results in the coming years since it's growing faster and has better margins than Apple's overall business -- not to mention the fact that management has recently been doubling down on the segment by launching four new services.
A conservative valuation
Apple's fundamentals look especially good when held up next to the company's stock price.
Starting with the commonly used price-to-earnings ratio, Apple's P/E of 16 is well below the average P/E of 22 for stocks in the S&P 500. And its valuation is just as attractive when using metrics from the cash flow statement and balance sheet. Apple trades at just 15 times its free cash flow and eight times its net cash position.
Finally, it's worth noting that Apple trades conservatively relative to analysts' average forecast for earnings per share to rise 12% annually over the next five years.
While investors who buy Apple stock today should expect volatility, shares look poised to outperform the market over the long haul.