Let’s Face it: Apple Inc. (AAPL) is Absurdly Cheap

I understand that consumer tastes can be fickle, and the popularity of a tech company’s products means everything to its success.  With that said, I’m betting that Apple is the same innovative marvel it has been over the last decade.  Sure, earnings growth isn’t likely to keep up at its gangbusters pace as a result of Apple’s enormous size.  To illustrate that, if you broke each of Apple’s businesses into separate companies, each would rank on the Forbes 100 list.

Furthermore, lower-priced devices will most likely result in margin compression.  At the same time, lower-priced items will also result in higher overall sales and customer loyalty from consumers all over the globe who couldn’t previously afford Apple products.

Moreover, at this price it’s pivotal to understand that an investor doesn’t need huge growth to justify the company’s absurdly low valuation.  Apple has $137 billion in cash and marketable securities on its balance sheet, amounting to $146 dollars per share. If you back out the cash, Apple is trading at 7 times fiscal 2012 diluted earnings per share. Apple also offers something neither Google nor Amazon does: a dividend. The stock yields 2.3% at recent prices, 30 basis points better than the 10-year Treasury bond. With that kind of cash at the company’s disposal, investors should expect big distributions to shareholders in the form of buybacks and increased dividends for years to come.

Bottom Line:  I’m Buying Apple Inc. (NASDAQ:AAPL)

Over the last few weeks, I’ve initiated a position in Apple.  My timing was poor in the sense that I bought before the company’s earnings results.  However, I considered the subsequent share price decline a gift from the market’s irrationality, so I bought again.  If Apple Inc. (NASDAQ:AAPL) continues to fall, I’ll buy even more.  Apple is ridiculously cheap, and at current prices represents a screaming buy.

The article Let’s Face it: Apple is Absurdly Cheap originally appeared on Fool.com and is written by Robert Ciura.

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