The Real Reason You Should Be Buying Apple Inc. (AAPL) After the Selloff

Over the longer term, sell-side analysts expect Apple to average EPS growth of 19-20% a year over the next half-decade, with next year likely to bring an iPhone 5S, possibly in new color options according to Jefferies analyst Peter Misek. It’s notable that these estimates outpace what’s expected of Google Inc (NASDAQ:GOOG) (15.7%), Microsoft Corporation (NASDAQ:MSFT) (9.6%), International Business Machines Corp. (NYSE:IBM) (9.9%), and Hewlett-Packard Company (NYSE:HPQ) (2.2%).

Despite the fact that Apple Inc. (NASDAQ:AAPL)’s stock has been down by more than 25% over the past three months, the company still has obvious advantages in the growth department, and the markets are misjudging this potential quite a bit. Using the price-to-earnings growth ratio, which can tell us just how investors are valuing a company’s forward EPS estimates, we can see that AAPL sports a PEG of 0.59. This is far, far below Google (1.4), Microsoft (1.5), and IBM (1.4). With a forward P/E  of 8.8X, Apple’s earnings stream is being valued close to on par with that of Microsoft (8.3X), despite the fact that Apple’s EPS growth is expected to be twice as high.

We could continue to slice and dice the numbers, but the message is clear: when compared to its competitors, Apple Inc. (NASDAQ:AAPL) can still be considered a growth investment, and this potential can be had at a very reasonable price at the moment. The iPhone, which is responsible for the majority of Apple’s earnings, is still performing well, and aggregate sales totals are expected to be up considerably by the end of the quarter. As mentioned in the survey above, early worries that older “legacy” models were cutting into the iPhone 5’s sales seem to have subsided, as holiday shoppers actually look to prefer the smartphone to a greater degree than they preferred the iPhone 4S last year.

With a projected dividend yield above 2%, income-oriented investors can also consider Apple Inc. (NASDAQ:AAPL) to be a solid addition to their portfolios, with considerable upside once near term profit-taking subsides at the turn of the calendar year.