Apple (NASDAQ:AAPL) is coming off of a great quarter in which the company reported EPS of $11.62 on $10.2 billion in net income . The EPS and net income numbers represented increases of 7.1% and 15.2%, respectively, compared to the numbers in the prior year's quarter. The company also announced that it will be augmenting its capital return program through increased dividends and share repurchases.

As a result of the impressive financials and increase in capital returns, Apple's stock has risen by over 20% since the company reported its financials on April 23.

AAPL Chart

AAPL data by YCharts

In addition to its EPS and net income, Apple reported revenue of $45.6 billion, an increase of 4.7% compared to its revenue in the year-ago quarter. Its gross margin also rose by 1.8 percentage points to 39.3% versus the gross margin in last year's quarter. . If Apple can yield good results like this in future quarters, further appreciation in Apple's stock could be on the horizon-supported by growing capital returns.

Appreciation in Apple's stock could continue especially if the stock is fairly valued or undervalued. So now that Apple has risen by such a wide margin in a little over a month, is it still a buy? Perhaps its competitors such as Google (NASDAQ:GOOG) (NASDAQ:GOOGL) or Microsoft (NASDAQ:MSFT) would be better investments at this point.



Forward P/E

5-yr. PEG


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Data Source: Morningstar

Apple is valued slightly lower than Microsoft on a trailing P/E basis at 15.2 versus Microsoft's P/E of 15.4. The current P/E of the S&P 500 is 18, so both companies look attractive on a trailing P/E basis. Google, on the other hand, looks richly valued with a P/E ratio of 30.6, making its P/E 1.7 times that of the S&P 500. On a forward P/E basis, Apple differentiates itself a little more from Microsoft compared to a trailing P/E basis. Nonetheless, Apple's forward P/E of 12.8 is not much more than Microsoft's at 13.6. Once again, both Apple and Microsoft look attractive considering their forward P/E ratios.

Interestingly, Google comes out on top comparing all three companies' five-year PEG ratios. The PEG ratios consider analysts' growth estimates for the companies going out five years. Therefore, given Google's current price, analysts think that Google's growth is the least expensive among the three companies. Still, PEG values over one indicate overvaluation and all three companies satisfy that criterion. Google's PEG of 1.3 is not egregious, however, and neither is Apple's PEG or Microsoft's at 1.5 and 1.6, respectively.

Apple's valuation on a cash flow basis is quite attractive with a P/CF of 10.6, which is below the S&P 500's current P/CF of 11. Microsoft's P/CF is not far behind Apple's at 12, but it is still above the S&P 500's. Google is valued almost twice as high as Apple on a cash flow basis with a P/CF of 19.4. Further, Google is valued a little over 1.75 times compared to the S&P 500 on that same basis. This means that Apple makes the most investment sense on a cash flow basis, while Microsoft is slightly overvalued and Google is quite expensive.

Take a bite out of Apple
Apple is the cheapest of the three companies considering the valuation ratios, save the five-year PEG. Even then, Apple's PEG of 1.5 is not that much more than Google's PEG of 1.3. Additionally, Apple's dividend yield of 2% is not much less than Microsoft's at 2.6%. Apple's dividend should also be increasing in the coming years after the current 8% increase as announced by the company in its recent earnings release.

Along with its dividend, Apple is an aggressive buyer of its own stock and plans to repurchase $90 billion worth of shares through 2015. Current shareholders will benefit tremendously from this as their share of Apple's equity grows from the decreasing number of shares. Combined with the dividend and share repurchase program, Apple's current valuation makes its stock a compelling buy for those looking for value and generous capital returns.