Apple Inc. (NASDAQ:AAPL) has move past the $665 mark per share this week, and by market cap became he most valuable company in the history of the markets. And yes, as analysts look at the company and its financials and fundamentals, they just can’t help but think that Apple stock is still a bargain at the current price. So though the stock has hit an all-time high, it hasn’t hit a ceiling yet?
According to several analysts, there’s still plenty of room behind the head of Apple Inc. (NASDAQ:AAPL) and any ceiling.
In a recent article, Apple Inc. (NASDAQ:AAPL) was assessed by several basic metrics that measure the value of a company compared to its stock price. One of the basic metrics is value compared to earnings. Apple Inc. (NASDAQ:AAPL) stock has been tradings at 15.4 times its earnings per share over the past 12 months; by comparison, the average company traded on the NASDAQ market has a value that 16.5 times earnings. If Apple was trading at the NASDAQ average, the stock would be trading at north of $700, and the stock is predicted to clear $736 by this time next year. Part of the reason for the lower P/E ratio may be attributed to a faster increase in profits than in the stock price. In the last 10 years, for example, earnings have risen 300-fold, while the stock price is up just 80 times.
But analysts are in decent agreement that things are still looking up for Apple Inc. (NASDAQ:AAPL) stock. Some analysts focus on the P/E ratio and multiples to determine market cap, but others just look at the company’s war chest and its ability to produce its game plan. “People spend a lot of time thinking about the market cap,” said Peter Karazeris, an analyst at Thrivent Financial for Lutherans. “I expect the market cap to go up, but it will because of execution and cash generation — not because of the multiple.”
“Apple has more fundamentals backing the company’s market cap,” said Shaw Wu, an analyst at Sterne Agee & Leach. “They have a lot of earnings, and lot of cash, which a lot of companies can’t really claim.” Apple Inc. (NASDAQ:AAPL) is believed to have about $117 billion in cash on hand, which is some of the largest such liquidity of any company.
The challenge will be the company’s production of new products – will the market tire of Apple? “There’s a lot of people like me who are concerned that they’re driving growth almost purely through new products,” said Dan Morgan or Synovus Trust Co. “What happens when its markets mature? I think of Apple as this consumer-products dynamo that has kept coming up with stuff that college kids want to buy — and that the rest of us then want, too. But how long can that continue?”
Maybe everyone will get a hint by the end of this year, when Apple Inc. (NASDAQ:AAPL) is expected to have a new iPhone, iPad and perhaps an iPad Mini in the market.