Apple (AAPL 0.47%) stock has taken a serious beating during the past six months, down about 24%. During the same period, the S&P 500 declined about 11%. With the stock already trading conservatively before the pullback, shares are now trading squarely in bargain territory. This is as evident as ever by comparing Apple to three stagnating companies in different industries: McDonad's (MCD -2.12%), Wal-Mart (WMT 0.38%), and H&R Block (HRB -1.42%).

Let's compare these four companies on a handful of metrics related to both recent performance and valuation.


Trailing-12-Month EPS Growth (YOY)

Trailing-12-Month Revenue (YOY)


Price-to-Cash Flow
















H&R Block





Recent performance
Measured by recent performance, Apple is the clear winner among these four stocks, with EPS soaring 43%. During the past twelve months, McDonald's and H&R Block were both in decline, with EPS falling 2% and 7%, respectively. Wal-Mart came close to maintaining its bottom line but still slipped slightly compared to the year-ago period.

But is this comparison distorted by Apple's monstrous performance during the last four quarters, or is this truly indicative of the tech giant's superior ability to grow its business compared to McDonald's, Wal-Mart, and H&R Block? While it is true that Apple's performance during the past twelve months is much better than usual, zooming out to five-year average growth rates for EPS still puts Apple's performance far head of the other three companies. During the past five years, Apple averaged annualized EPS growth of about 34%, while the highest five-year average from the other three was Wal-Mart at close to 6%.

To be fair, it's very possible that Apple's sales growth could flatten during the next twelve months, or even turn negative. On the other hand, the tech giant could post double-digit growth during this period. This volatility and uncertainty is part of the package for a company that derives over 60% of its revenue from a single product category. Indeed, this uncertainty is a big reason for the stock's low price-to-earnings multiple. But the fact that Apple can still grow so substantially in a single year is solid evidence that the company's underlying brand is still thriving.

Despite the fact that Apple is proving to investors it can still grow its business meaningfully, just as these other three stocks are clearly struggling to grow their businesses, the tech giant trades at the most conservative valuation of this group of stocks, with a P/E ratio of just 10.5. Compared to McDonald's and H&R Block in particular, which have P/E ratios of 25.2 and 20.1, Apple stock looks like a steal.

Does Apple really deserve to trade at such a discount compared to companies like McDonald's and H&R Block? Does it truly deserve similar P/E and price-to-cash flow ratios as Wal-Mart? Sure, Apple faces some uncertainty about its ability to live up to the hugely successful iPhone cycle it benefited from last year. But the company has also clearly demonstrated its brand and pricing power over the last two decades, building a deep and complex connection with users that is here to stay. Even more, this loyal customer base is still growing, and it's as loyal as ever.

While a comparison of Apple with other names in totally different industries certainly isn't perfect, it does paint a telling story about just how conservative Apple's valuation is today.

The market is not a rational place. And Apple's valuation doesn't make sense. These things happen from time to time -- and I call them bargains.