peg01 aapl what are you buying $1 of current or actual growth fo

来源: marketreflections 于 2011-07-25 22:39:19 [] [博客] [旧帖] [给我悄悄话] 阅读数 : (116303 bytes)

http://seekingalpha.com/article/277969-apple-s-peg-ratio-signals-share-price-gains-ahead

Apple's PEG Ratio Signals Share Price Gains Ahead

 
30 class='num'> comments |  by: Posts At Eventide July 5, 2011 | about: AAPL
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On Friday, Apple (AAPL) closed at $343.26, up $7.59 on the day and up $16.91 or 5.2% on the week. Although the week's share price advance was impressive, Apple remains significantly under valued based on the company's current rates of revenue and earnings growth. In the first six months of the current fiscal year Apple's revenue has risen 76.2% and earnings per share has gained 83.2%. In contrast, since the first trading of Apple's current fiscal year on September 27, 2010, the share price has responded with only a 17.9% gain.
Last week in a post titled AAPL: The Coiled Spring, I compared the median price targets for three popular equities: Amazon (AMZN), Apple and Netflix (NFLX) and the share prices for each. Apple is trading at a price-earnings multiple of 16.35 times trailing 12-month earnings of $20.99 per share and at only 76.3% of the median Wall Street price target of $450 per share. In comparison, both Amazon and Netflix are trading at much higher price earnings multiples and at or near their respective median price targets.
Apple's PEG Ratio: More Share Price Gains Ahead
For this post, I asked Jeff Fo*****erg of the Apple finance board to adapt his popular "coiled spring" graphic to reflect not the price-earnings multiples of the above-referenced companies but the PEG ratios of the companies at Friday's closing prices.
[Click to enlarge]
Simply defined, the PEG ratio represents the price-earnings multiple divided by earnings per share growth. The lower the PEG ratio, the lower the current valuation relative to rates of earnings growth. Apple's current PEG ratio is 0.63 versus 2.92 for Amazon and 1.98 for Netflix. Compared to high-flying stocks such as Amazon and Netflix, Apple is bargain priced and the company's current PEG ratio signals more share price gains ahead.
Because Amazon, Apple and Netflix operate in different product and service markets, the PEG ratio is a more effective way to compare and contrast the current market valuations of the three popular equities than a comparison of price-earnings multiples alone. This comparison accentuates the deep discount to growth at which Apple currently trades.  
Apple's Price Targets and EPS Growth Expectations
Although the median Wall Street price target for Apple is presently $450 per share, my price target for Apple is $590 and is based on strong revenue and earnings growth expectations. For the three-month period that ended in late June (FQ3 2011), I expect Apple to report revenue growth of about 70% to $26.219 billion and eps growth of about 90% to $6.67 per share. For the fiscal year that ends in late September, I forecast earnings per share of at least $27.50 and an eps growth rate of no less than 81.5% on revenue of at least $112 billion. At Friday's closing price AAPL is trading at a multiple of only 12.5 times this FY 2011 eps estimate.
Apple's pace of revenue growth in the June quarter will be impacted by the appearance of Apple iPad sales in the prior-year period for the first time. However, the rate of earnings per share growth will benefit from Apple's ability to contain the growth in operating expenses to less than 10% of reported revenue.

The Apple iPhone has been in the market for only four years and the Apple iPad is in a nascent stage of global market development. The two products combined will sustain impressive rates of revenue and earnings growth for Apple over the next several quarters. The Wall Street consensus revenue estimate for FY2012 is only $125.13 billion or 11.7% above my FY2011 revenue forecast of $112 billion and the FY 2012 Wall Street eps estimate is only $28.86 per share or 4.95% above my FY 2011 estimate of $27.50. Wall Street FY 2012 revenue and earnings estimates will rise dramatically over the next several months and significant revisions in analyst estimates will occur soon after the release of the June quarter numbers later this month. Today's highly discounted valuation for AAPL will appear even more obvious following the release of the June quarter results.

Conclusions
 
No matter last week's 5.2% rise in Apple's share price to $343.26, the shares continue to trade at a significant discount to current rates of earnings growth. At Friday's closing price AAPL is trading at 16.35 times trailing 12-months earnings per share and at only 12.5 times my current eps forecast for the fiscal year ending in September. Apple's PEG ratio of 0.63 signals more share price appreciation ahead. Compared to other popular equities such as Amazon and Neflix, Apple's current valuation renders the shares dirt cheap.  
Disclosure: Long AAPL
This article is tagged with: Technology, Personal Computers, United States
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  • This becomes even more apparent if we use actual growth. Although, I doubt the spring can handle that kind of compression.

    Using PE ttm / Actual Growth ttm
    I will use Goog, AAPL and AMZN as example.

    AAPL Stats: 16.60 PE / 78.10% 4qtr/4qtr actual growth = $0.21
    GOOG Stats: 20.67PE / 17.15% 4qtr/4qtr actual growth = $1.21
    AMZN Stats: 92.22 PE / 1.32% 4qtr/4qr actual growth = $69.86

    This ratio states, what are you buying $1 of current or actual growth for? If you buy AAPL today your paying 21 cents for $1 growth, AMZN paying $69.86 for $1 growth, etc.
    5 Jul, 12:11 PM    3 
  • Travis:

    The FY2012 revenue and eps estimates for Apple remain remarkably low. Actual results trump estimates and both the June quarter and September quarter results will be catalysts for significant share price appreciation.
    6 Jul, 12:57 AM    1 
  • That means you are paying even less for Apple's actual growth. I think Travis was trying to point out how cheap it is to buy the growth story in Apple.
    6 Jul, 05:10 PM    1 
  • Absolutely! I understand the important point that he made. I used the 5-year expected growth rate in the ratio because it's commonly published.

    The point I intended to make was in support of his argument.
    7 Jul, 01:38 AM    0 
  • Netflix is going to the moon, leaving Apple earthbound. Apple should have acquired Netflix when it had the chance. Apple missed out horribly.
    5 Jul, 01:58 PM    0 
  • Constable Odo:

    Apple does best what Apple does best. The company's focus is on innovating and monetizing hardware devices. Apple became the world's largest music distributor because the company needed to create an efficient distribution system to provide inexpensive content for the company's devices.

    For the distribution of movies and TV shows to be consumed on Apple's hardware devices, Netflix has done an amazing job. There's no reason for Apple to compete with or acquire Netflix because it would be challenging for Apple to create greater efficiencies.

    Apple's focus on the company's core markets provides gross margins in the range of 40% and an ability to limit operating expenses to less than 10% of reported revenue.

    This strategy results in net income closes to $.25 on each revenue dollar and this fiscal year will produce revenue growth of over 70%.

    My 12-month price target for Apple is $590 per share.
    6 Jul, 12:45 AM    2 
  • Poor Post A Eve.. I may visualize you holding the bag but most probably (95% chance) you do not hold the stock.
    6 Jul, 01:13 PM    0 
  • Let's compare notes on the valuation 12 months from today. You'll find me here.
    7 Jul, 01:14 AM    0 
  • it seems you have high hope for NFLX since you believe the way the market is flirting with NFLX. Besides the p/e and all the junks it is a one product company, no diversification of business risk. May be there is no competition today but the competitors do not advertise what they are doing. I do not think Apple's management have high opinion about NFLX.
    6 Jul, 01:11 PM    0 
  • I don't have an opinion on NFLX. In the article the valuation is used only for purposes of comparison. My interest in Netflix is as a content provider for hardware devices.
    7 Jul, 01:19 AM    0 
  • I think it is important to acknowledge the macroeconomic impact on AAPL's pps. If the economy tanks, AAPL could be back in the $100 range (which would make it an extraordinary buy). Let's hope the recovery has legs.
    6 Jul, 03:19 AM    0 
  • That WOULD be a bargain, as Apple has over $77 a share in cash by now. That would leave an enterprise value in the low-$20s. Heck, with a little borrowing, if Apple were in the $100 range, they could just take the company private. Or just about any company in the world could take a run at buying them if the EV was in the low-$20s. Somehow, I don't think Apple will ever get down to $100 again, even though it was there, just 2 short years ago.
    6 Jul, 11:42 AM    1 
  • KenC:

    One point to add to your thoughtful comment is when Apple was trading in the $100 per share range deferred revenue accounting on the iPhone obfuscated the company's rates of revenue and earnings growth. That trading range occurred during the depths of the recession and prior to the retrospective adjustment to the historical results following the elimination of the deferred revenue rules on iPhone sales that occurred with the release of FQ1 results in early 2010.
    7 Jul, 01:35 AM    0 
  • You, of course, are correct!

    Having said that, a careful observer at the time, could have noted that Steve Jobs, himself, brought clarity to the situation in the Oct 2008 conference call by detailing Apple's release of Non-GAAP figures. I considered the opportunity as good as an arbitrage. Two years later, the stock had tripled. Now, as you and others have noted, Apple is essentially as cheap as it was back then in the depths of the recession. I don't expect Apple to triple again from here, but a strong upward move is definitely in the cards.
    7 Jul, 08:16 AM    0 
  • KenC:

    First of all, I'd like to thank you for participating in the discussions on my Seeking Alpha articles. I appreciate your comments here and enjoy reading your comments at online publications we both visit.

    I spent more than two years explaining the intricacies of deferred revenue accounting on the iPhone. With the exception of those who had a strong background in accounting or closely followed Apple as an enterprise, few were able to fully understand the impact of the deferred revenue on the company's quarterly results.

    In my view the iPhone 5 will be a revenue and earnings catalyst on a scale not seen before.
    8 Jul, 01:06 AM    0 
  • RPL, I think those of us who went thru that period of analyst confusion from 2007 to 2009, gained enough perspective and patience to realize that the market is very fallible. Thanks to yourself, Zaky, Muller and others, we made it thru with our sanity, and a nice profit to boot! That experience certainly makes it easier to get thru the last 5 months of enigmatic price action.
    8 Jul, 08:22 AM    0 
  • KenC:

    Understanding the history of the share price performance is among the reasons I'm comfortable with a $590 price target.
    8 Jul, 11:16 AM    0 
  • Dear Bling D: do you know we are coming out of Rec.. and Apple did wonderfully during this time when economy really tanked (unemployment >9%) . And Apple was not $100. during this time.
    6 Jul, 01:16 PM    0 
  • Dear Author: the way you are saying it appears you have calibrated PEG with share prices. If so won't you please present such information.
    6 Jul, 01:19 PM    0 
  • My valuation model is based on a number of metrics. Much of the data and analysis can be found on my blog at postsateventide.com. I've recently joined Seeking Alpha as a contributor and future articles (including updates to my valuation model) should appear on my profile as they are published. Stay tuned...
    7 Jul, 01:30 AM    0 
  • It is becoming apparent like sunlight that Mr. P. A. Eventide is participating in the topics related to post February, 2011 Apple share price movement only to advertise ( how great he is elsewhere) himself. May be he is great but it is not in good taste to refer people who ask him question to his great work somewhere else. If I write something or if I am speaking to a group and facing question I'll definitely not tell the audience to wait for my speech at a later date or a book to appear later. I am strictly aware that I should not be offensive when expressing my viewpoints, if I am I'd beg apology.
    7 Jul, 11:12 AM    0 
  • The point was to provide a reference to the publication of my source data and other corroborating documentation previously published. If you wrote something or were facing questions would you not provide readers or listeners with references to the source documentation that provides support for the points that are made?

    Responding with facts and responding with references to source data are in my view among the most respectful and polite ways to respond to a question asked in earnest.
    8 Jul, 01:12 AM    0 
  • P.A.E.- You are crafty- in my comment I did not say I "am facing question.." I wrote that I am asking you to provide the correlation figure relating share price with PEG. It is O.K. if you were using a common,natural observation. that such low PEG begs for a looksee of the investors.
    8 Jul, 10:56 AM    0 
  • I don't suggest using the PEG ratio alone as a metric. I do suggest using it as a corroborating indicator. There should be much more to a valuation model than the popular measures such as p/e multiples or PEG ratios.
    8 Jul, 11:18 AM    0 
  • so, now we are back to square one- your write up is shouting out loud "look here is stock with a PEG sooo lowww- come buy it". The investors know all the elements of the metric and these are all good, better than AMZN, LNKD, NFLX, etc. but its p/e is not there. And as I postulated you are even an investor in AAPL, you are one of the elite ivory thinker who would say at the end "on the other hand.."

    Forgive me but I am disgusted with people who say Apple is under valued.
    11 Jul, 09:37 AM    0 
  • You may be disgusted with people who say Apple is undervalued. We'll let the market determine the outcome of the argument. There's no forgiveness needed. You are entitled to your point of view.

    Are you suggesting the Street's median price target of $450 per share isn't justified for a company with an eps growth rate exceeding 80%, more than $70 in cash standing behind every share and is currently trading at a multiple of only 17 times trailing 12-month earnings?
    15 Jul, 02:27 AM    0 
  • apparently we have said everything we want to get across and it may be noted that you concluded your presentation with a question. Dear esteemed sir we are all asking the same question and as usual the "answer my friend is blowing in the wind". For your perusal the recent news about Google's earnings and market's corresponding response does raise a question in my mind which I am presenting in the following:
    Googles quarterly earning about $9.
    Google's share price about $600.
    Apple's 3rd quarterly eps about $6. its share price should be 600X6/9= $400. Question: what could you do? Nothing. I want to know that are you just a book economist or practice what you preach. No offense, I hold you high regard and also the AFB.
    15 Jul, 10:18 AM    0 
  • Since I published this article 11 days ago, Apple has risen from $343.26 to today's closing price of $364.92 which represents an all-time closing high. That's a gain of about 6.3% over nine trading sessions.

    Apple's 2% rise today is in anticipated of next Tuesday's June quarter numbers and my posted eps estimate is $6.67 per share. I maintain a 12-month price target of $590 on AAPL.

    Please let me know what questions you believe I have left unanswered.
    16 Jul, 12:50 AM    0 
  • you have not answered any question posed to you because you spoke too much and probably you speak too much. Your article postulated that there is a relationship between PEG and share price and I requested that you provide that relationship and you have been unable to provide that and I understand that failure as there is no relationship between PEG and share price. You just speak too much. Another thing if AAPL reaches $590 ever I will look for you and treat you at Four Seasons.
    16 Jul, 05:30 PM    0 
  • If you are looking for validation of the PEG ratio as a valuation tool I suggest you look to the work of Peter Lynch who brought this ratio into popularity starting in the late 1980's.

    I use the PEG ratio as a corroborating metric and I have provided you with references to a large body of my work in support of my $590 price target for Apple.

    Again, the rise in Apple's share price since the publication of this article on July 5th indicates the market has responded to AAPL's low valuation relative to current earnings growth by moving the share price significantly higher.

    My valuation models indicate continued share price appreciation in the months ahead.
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