Apple Inc. (AAPL) on Joel Greenblatt’s ‘Magic Formula’ Screen

Similar to Oracle and Apple, it is attractive based on valuation when taking into account their stable earnings outlook in combination with the potential for increased exposure to higher growth markets.

Apple Inc. (NASDAQ:AAPL)

Apple’s stock has sold off behind concerns that earnings growth and margins will retreat from the high levels experienced over the past decade.  While Apple does not have a clear market-changing product to drive growth on its bench like the iPad, iPhone or iPod, it still has a good outlook.

Apple’s earnings growth will likely retreat to the low double digit levels, but that is still steady growth.  In addition, Apple has $42 cash/share and will continue to generate significant cash flow.  Its valuation is attractive when taking into account its earnings growth, albeit at a lower level than years past, and ability to generate cash flow.

Conclusion

All three of these stocks are attractive for one reason or another.  Oracle, despite its higher valuation, has a steady earnings outlook and earnings growth is not dependent on pushing into new markets like Microsoft.  Apple has the best return metrics of these stocks but news flow and momentum have been less than favorable.  Microsoft has stable earnings and has the chance to improve its earnings power if it has success entering new markets.

The article Apple on Joel Greenblatt’s ‘Magic Formula’ Screen originally appeared on Fool.com and is written by Mike Thiessen.

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