How Does Apple Compare To Other Value Tech Stocks?

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AAPL: Apple logo
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Apple

With Apple‘s (NASDAQ:AAPL) days of high growth appearing to come to an end, amid shrinking iPhone shipments and headwinds in the Chinese market, the stock trades at a forward price-earnings multiple of just over 10x, implying that investors are increasingly viewing Apple as a value bet. While tech stocks aren’t usually associated with value investing, we are seeing an increasing number tech names – ranging from semiconductor bellwether Intel to enterprise tech giant IBM – contend with growth headwinds, as their respective industries mature and they face competition from smaller peers. Below, we compare Apple’s key valuation metrics with other mature technology stocks.

We have a $127 price estimate for Apple, which is about 30% ahead of the current market price.

See Our Complete Analysis For Apple |Intel |CiscoIBM

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  • Apple and IBM have the lowest P/E ratios among these stocks, trading at around 10.3x forward earnings. Apple’s multiple is depressed by the fact that it is set to post its first year-over-year revenue decline in over a decade. Additionally, risks surrounding the iPhone franchise and regulatory concerns in China could also be weighing on the multiple. If adjusted for its $230 billion cash balance, Apple’s multiple would be even lower.
  • Apple’s price to cash flow (P/CF) ratio also remains among the lowest of the group, as the company’s iOS cash cow and asset-lite business model allow it to generate significantly more free cash flow each year than the other three companies combined. Apple generated about $70 billion in free cash flows over the last fiscal year.
  • Apple’s dividend yield remains the lowest of the pack at 2.3%, as the company’s capital return program has largely emphasized share buybacks. Less than 30% of the cash from Apple’s $163 billion (to date) capital return program has been returned in the form of dividends. That said, Apple recently raised its quarterly dividend by 10%, and it is likely that the trend will continue as its share count decreases. ((Apple Q2’16 Earnings))
  • Apple also fares poorly in terms of near-term growth, with the company’s EPS projected to decline (-10% per analysts surveyed by the WSJ) this year amid currency headwinds in emerging markets and relatively weak uptake of the iPhone 6S. The other firms are expected to see flat or positive EPS growth this year.

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