Is Apple Inc. (AAPL) Still A Growth Stock?

If being a blue chip stock means generating cash flow then Apple is doing this like neither of their large competitors. In the last six months, Microsoft grew its cash and investments by 3.05%, and Google grew their cash and investments by 5.92%. In the same six month period, Apple showed a 13.08% increase in cash and investments. In fact, Apple’s cash and investments now represent over 31% of the company’s market cap. Considering Apple added over $15 billion in the last three months to the balance sheet, this seems almost ridiculously high.

The author seems to assume that a fast growing company can’t pay a dividend or buy back shares. The truth is, Apple is being treated much worse than a blue chip stock. Some would argue that Microsoft is a blue chip, and the company’s shares have a PEG ratio of 1.15. Others might argue that Google is a different type of blue chip stock, and yet their shares carry a PEG of 1.30. Apple on the other hand, has a PEG ratio of 0.56. If Apple merits being called a blue chip, the shares should carry a PEG ratio of at least 1. Many other blue chips like The Coca-Cola Company (NYSE:KO) or McDonald’s Corporation (NYSE:MCD) carry PEG ratios of near 2 or more. At a PEG of 1, with the current expected growth rate, the author is right shares wouldn’t trade for $700. Using these assumptions, the appropriate price for Apple’s shares would be closer to $850.

The article Is Apple Still A Growth Stock? originally appeared on Fool.com and is written by Chad Henage.

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