Source: fortune.com --- Monday, October 02, 2017
Apple views itself as a fabulous growth machine, the fount that will pour forth the most innovative, best-selling products in tech for years to come. Investors have a starkly different take. Right now, they’re pricing Apple aapl as a dull plodder, a deep value stock with poor prospects for firing up sales and earnings--the iPhone notwithstanding. In one sense, that’s hard to believe. After all, the stock--despite the recent selloff driven by disappointing sales of the new iPhone 8 --has surged 33% this year, adding $200 billion in value, and prompting predictions that the Colossus of Cupertino will soon boast the world’s first $1 trillion market cap . But don’t confuse that spike in the share price with a surge in optimism about Apple’s future growth. The proof: The recent run has lifted Apple’s PE ratio to just 17.5, significantly below the S&P average of well over 20. A low multiple means that investors aren’t expecting their gains to flow from rapidly rising profits, driven by reinvesting earnings at high rates of return--Warren Buffett’s ideal. They’re buying the stock for the cash it hands them in dividends and buybacks. In their view, Apple is a mature slowpoke that can’t find much to profitably invest in, so it’s best choice is to pay out everything it earns. And that’s just what Apple is doing. Apple’s fiscal year ends in September, so to include the most recent reported results, let’s examine its financials for the past ...
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