Apple Inc. (AAPL) Will Regain Glory

Apple’s current and forward P/E multiples of 9.5 and 8.5, portrays that the market doesn’t expect the company to grow at all. However, the earnings multiple placed by the market on a company that has been growing at a rapid rate is well below publicly traded peers including Google and Amazon. Even after applying a sizable haircut to Google’s current and forward earnings multiple of 24.2 and 14.6 on Apple, yields a much higher value for the iPhone maker.

Due to the recent sell-off, Apple Inc. (NASDAQ:AAPL)’s dividend yield went from being decent to being great. And the company has cash reserves in excess of $137 billion. On top of that, the company is generating substantial amounts of cash flow from its operations as well, Apple earned a staggering $23 billion in the last quarter alone.

And the company should boost its current share-repurchase plan as the company’s stock is at 52 week-lows. While some investors have stated that a huge buyback to the tune of $30 billion-$40 billion might impact the company’s US cash reserves, it can easily take on debt and repay using funds tucked away overseas. A big share repurchase at current share prices will create substantial amounts of shareholder value. And lastly, an increase in cash dividend is also a realistic likelihood in the near-to-medium term, as it will increase shareholder optimism substantially.

The Takeaway

At current levels, Apple Inc. (NASDAQ:AAPL)’s shares are quite cheap. The company has a strong history of introducing products that are wildly popular amongst consumers. As the company launches newer products, and makes its way into newer territories, the company’s earnings will get a major ramp.

Ishfaque Faruk has no position in any stocks mentioned. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple and Google.