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Apple Inc. Message Board

  • ace_92029 ace_92029 Oct 22, 2010 3:58 AM Flag

    Apple Idea Proving Undervalued Today

    Apple generates about 20 Billion dollars in free cash per year according to Business Week:

    If Apple did pay a dividend (and I'm not speculating that the will), they could pay out that full amount to investors (and still keep there 51 Billion on the books just in case)...if the stock was to rise to $400 a share...and considering there are about 930 million shares outstanding, Apple would be paying out 20 Billion dollars on a total of 380 Billion in total market cap which works out to be 5.3% automatic dividend return.

    So at $400 Apple would be returning 5.3% of your investment automatically ASSUMING Apple did not grow much and did not generate even greater cash flow! So you get to invest in a company, have an automatic 5.3% return plus whatever stock appreciation occurs...all on a company growing at 60-70% per year with a trailing PE ratio of 20 (including cash) today. Not bad huh?!

    I think Apple will grow 60% this next year and then average 30% growth for the next 4 years. That's approximately a 36% average return for 5 years. So assuming Apple earns $23 a share for fiscal year 2011 (60% growth in earnings/revenue), Apple would have a leading PE ratio today of about 13.

    So the PEG (PE ratio to earnings growth) which for an average company should average about 1.0...would be 13/36 or 0.36.

    0.36 let me repeat that...that is an amazing PEG ratio. If I am even half right the PEG ratio for Apple is better than 98% of all company's trading in the S&P 500. I'm guessing there, but that is pretty amazing for a proven company with great products and prospects and the Henry Ford of our times Steve Jobs.

    If you do not own Apple today, you are missing one of the best valuations of our time. The stock is a clear double over the next 15 months. It should be trading at a 30PE ratio today...$450 would be a fair price...unless of course you don't expect Apple to grow very fast...of course the analysts have been far off for 7 straight years now.

    Try the internet analysts...they've been as close to smack on as anyone. Like Andy Zacky from Bullish Cross for 1 instance. There are a few others that have been even more accurate. They are all very good in my opinion. They may miss unit volumes on a certain product llne, but their ability to predict earnings and revenue growth have been FAR FAR superior than the conventional analysts. Its almost a joke. Almost as big of a joke as how undervalued Apple is.

    Good luck all-

    Good luck all.

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    • Yes!!!

    • By the way if Apple continues to grow its cash (20 Billion) at its current rate (50% per year) its easy to see how Apple could sustain paying out 20 Billion a year ($22 per share) todays prices that would be a dividend return of 7%. Not bad, 7% return automatically plus share appreciation of a low PE.

      You can't get 7% anywhere...remember Apple would be 7%++ due to their (my) expected growth rate.

    • past tense. pay a dividend and your debts now exceed your cash. LOL and only $3 to $4 bil after tax is generated from macs. balance from "everything else." sorry to break the news, but it took less than 1 year for android to flyyyyyyyyyyyyyyyyy past your broken antenna iphones in mkt share. and the mkt for tablets will exceed the number of bicycle riders in the heart of shanghia (and, just our secret, notice how there is no "head start.") LOL buyyyyyy buyyyyyy buyyyyyy, and get burned sooooonnnnnn sooooonnnnnn soooooooon. and remember this post before, during, and after it happens. oh, forgot, why is tax rate 20% and not 35 to 40%. hmmmmmmmmmm????????? you can start chopping that "$20 mil cash flow" even more Paul Bunyon. LOL

      • 1 Reply to rastas_got_the_ganja
      • I'm not sure if you noticed, but 3 days ago Apple announced it had sold over 14 million iPhones in the latest quarter and that they could have sold quite a bit more if they did not have supply problems. Now this is selling into a call phone market that buys about 1.2 Billion phones per year...and smart phones although a small percentage of the overall cell phone market is growing at about 65% per year.

        Smart phones of Apple (and Android) are being received well and this market can expect massive growth as more people convert there phones to smart phones. I believe there is EASILY enough room for 2-3-4 -5 competitors in this HUGE market. Apple just needs to pick up there 10% slice...which is EASY pickings. I predict they will dominate this market, but granted Android could be tough, but I think they are a full step down in quality and integration compared to the iPhone.

        Nevertheless Apple's cash flow each quarter is just HUMOUNGOUS and unlike the 1 trick pony (Google) Apple has a number of good products that all work very well together and will only get better in time. Remember who runs Apple...his name will be talked about for the next hundred will never hear that of Google....ever. Nor does Google make any money on its operating system...yet. Different strategy and still has a lot of catching up to do to get to Rims level of market penentration....Apple is almost there...Android will need 2 more years I suspect...that is if they continue to make headway and improve their product.

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