Apple Inc. ’s stock has seen a massive decline of about 24% over the past six months versus a decline of 11% in the S&P 500 index during the same period. “With the stock already trading conservatively before the pullback, shares are now trading squarely in bargain territory,” says a report from Motley Fool by Daniel Sparks.
Apple is cheap and loaded with potential
The fact becomes more evident if a comparison of Apple’s stock is made with three stagnating firms in different industries – McDonald’s, Wal-Mart and H&R Block, Sparks says. On comparing, the recent performance of these stocks, Apple emerges as the clear winner with EPS seeing a rise of 43%.
Declines of 2% and 7% have been seen in the EPS of McDonald’s and H&R Block, respectively, in the past 12-months. Though Wal-Mart managed to reach close to maintaining its bottom line, but it slipped slightly on a year-over-year basis, Sparks says.
Not only has Apple performed better than usual during the past 12-months, but if we look at it from the five-year average growth rates for EPS, then too Apple turns out to be the leader among the four firms. In last five years, Apple’s averaged annualized EPS growth was around 34% while the best five-year average growth among the other three was of Wal-Mart at 6%, the report says.
Though Apple Inc. offers a lot of potential to the investors, similar to the other “three stocks” that “are clearly struggling to grow their businesses, the tech giant trades at the most conservative valuation of this group of stocks,” says Sparks. The iPhone firm has a PE of 10.5 compared to 25.2 and 20.1 for McDonald’s and H&R Block. On such a metric, Apple’s stock “looks like a steal.”
Even though comparing Apple with stocks from different industries does not make much sense, it does give some hint on how “conservative Apple’s valuation is today.”
Funds trust Apple
Separately, there is another evidence of Apple’ stock available cheap. The iPhone firm has once again been able to generate the interest of Norway’s top performing tech fund. DNB Nordic Technology, who has been ahead of peers for the seven of past ten years, bought some Apple Inc. stock last week after it exited the stock in spring last year, says Bloomberg.
In an interview to Bloomberg, DNB ASA told Bloomberg, “It’s too early to take a big position in Apple,” but “the stock is obviously very cheap right now.” The replacement rate for the iPhones will be “stretched,” and this has led DNB ASA to estimate that EPS for 2016 will come down to $8.
“Then the stock is still cheap. We don’t think Apple will lose market share. But they replaced a lot of their users last year and will have a tougher year this year.” The fund house said.