These two factors basically cancel each other out, such that QUALCOMM, Inc. (NASDAQ:QCOM) emerges in the end with an enterprise value-to-free cash flow ratio of 17, or basically identical to its P/E. Valuation-wise, I think this is a fine price to pay for 18% growth. And Qualcomm’s 2.3% dividend yield? That’s just icing on the proverbial cake.
Apple Inc. (NASDAQ:AAPL)
What’s better than cake with icing? (Apple) pie a la mode. At Apple Inc. (NASDAQ:AAPL) we’re looking at an even more enticing valuation proposition, where the stock’s P/E of 10 is much cheaper than Qualcomm’s, its dividend (2.9%), greater, and its projected growth rate (21%), faster.
Meanwhile, like Qualcomm, Apple Inc. (NASDAQ:AAPL) sits atop a mountain of cash more than $39 billion tall. And to top it all off, the company’s generating more free cash flow than it reports as net income ($45.4 billion FCF versus $39.7 billion in income), rather than less FCF, as is the case at Qualcomm.
Result: If I like Qualcomm stock a lot (and I do), then I have to like Apple even more. (And I do.)
The article Wednesday’s Top Upgrades (and Downgrades) originally appeared on Fool.com and is written by Rich Smith.
Motley Fool contributor Rich Smith owns shares of Apple. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple and Qualcomm.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.