On the subject of financial cushioning, Microsoft Corporation (NASDAQ:MSFT) and Apple are two of a kind. Apple holds $145 billion in cash, equivalents, and short and long-term securities on its books (representing 35% of its market capitalization). Apple Inc. (NASDAQ:AAPL) also pays a 2.75% dividend yield and recently approved a $60 billion share buyback program.
And for all the griping about the company’s disappointing results in recent quarters, it’s not as if Apple is in the midst of collapse. Let’s be fair: Apple Inc. (NASDAQ:AAPL)’s financial performance over the past several months is disappointing only to those who unreasonably believe a company can continue growing at an exponential rate forever.
The rational conclusion: Apple is a buy
For those of us who recognize the inevitable limitations of economic reality, it shouldn’t need to be said that no company can continue parabolic growth into infinity. At some point, a company’s growth will taper off.
But as previously mentioned, it’s not as if the company is in dire shape. Apple recorded 45% revenue growth and 60% growth in diluted earnings per share in fiscal 2012. This year, despite the market being repeatedly ‘disappointed’ by the company’s numbers, Apple Inc. (NASDAQ:AAPL) has booked 15% revenue growth over the first six months of the year.
It’s worth noting the company’s margin compression has resulted in a 9% decline in first-half diluted EPS year-over-year. But are the numbers presented here really grounds for a nearly 40% haircut off the share price?
Only irrational investors or those with a personal bias against Apple could truly conceive it to be overpriced. I’m no Apple zealot; I just know a value stock with multiple margins of safety when I see one. And through the combination of a low valuation, solid dividend yield, and gigantic buyback, Apple Inc. (NASDAQ:AAPL) definitely is a value opportunity.
Robert Ciura owns shares of Apple. The Motley Fool recommends Apple and Cisco Systems, Inc. (NASDAQ:CSCO). The Motley Fool owns shares of Apple Inc. (NASDAQ:AAPL) and Microsoft Corporation (NASDAQ:MSFT).
The article Why You Should Buy Apple originally appeared on Fool.com.
Robert is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.