Take Advantage of Apple Inc. (AAPL)’s ‘Steve Jobs Premium’

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There is more evidence of a lost ‘Jobs premium,’ though, whether we’re looking at book value splits (163%/123%) or cash flow value splits (74%/21%), with the latter set of splits being of supreme importance. Between 2006 and 2010, Apple’s historical cash flow valuation was 16.7X, while it’s at 10.9X this year. Over this seven year period, the size of Apple’s cash hoard has nearly sextupled and was approximately $120 billion high (see “Will Apple Pay a Special Dividend?“) at the end of last quarter.

In addition to being cheap compared to its historical valuation, shares of Apple Inc. (NASDAQ:AAPL) also look rather attractive when compared to tech peers like Google Inc (NASDAQ:GOOG), Microsoft Corporation (NASDAQ:MSFT)International Business Machines Corp. (NYSE:IBM), and Intel Corporation (NASDAQ:INTC).

For starters, shares of Apple trade at a far lower trailing P/E than Google (21.8X), and forward-looking metrics give AAPL the advantage: 10.0X to Google’s 15.0X. Sell-side analysts are expecting solid annual EPS growth (15-16%) for the search engine company through 2017, but it’s worth noting that Apple’s forecast trumps these estimates by four percentage points on average.

Apple Inc. (NASDAQ:AAPL) also has a growth advantage over Microsoft, IBM and Intel, as analysts are expecting just 9-10% yearly growth in EPS over the next half-decade for each competitor. Interestingly, PEG ratios — the metric used to determine just how investors are valuing a company’s growth prospects — indicate that Apple may be the most underappreciated mega-cap tech stock on the markets today. Apple’s current PEG is 0.68; typically any figure below 1.0 signals an undervaluation. Conversely, Google (1.39), Microsoft (1.45), IBM (1.38), and Intel (0.80) are all more expensive at the moment.

We could go on and on about Apple’s valuation — especially when factoring in its growth prospects — but we’re likely beating a dead horse, for lack of a better phrase. There aren’t too many investors who can make a case that shares of the tech giant aren’t cheap; in fact, the most bearish arguments are qualitatively-backed at best. As we discussed above, however, many of these concerns aren’t worth fretting about, and may have temporarily reduced Apple Inc. (NASDAQ:AAPL)’s ‘Steve Jobs premium’ to a particularly attractive level.

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