With Steve Jobs going on indefinite medical leave from Apple (AAPL), we decided to look at how Apple is stacking up against several of its competitors in the smartphone market. We analyzed Apple, Google (GOOG) and Research in Motion (RIMM). Looking solely at the fundamentals and intrinsic value of the stocks, we were surprised to see a stock emerge from our analysis with both excellent value AND growth characteristics.
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For reference, the past 5 years’ annual FCF/share growth rate is as follows: AAPL 49%, GOOG 51%, RIMM 63%.
All companies showed similar growth rates in the past and similar projected 5-year growth rates. While GOOG is trading at a slight premium to intrinsic value, RIMM is a standout, trading at a large discount to intrinsic value.
The valuation analysis shows us the following:
GOOG again seems to be trading at a premium for its growth rate when looking at the PEG and EV/EBITDA. RIMM is approaching an EV/EBITDA of what we consider a value stock (around 7 or less) and has a PEG of much less than 1. AAPL seems to be fairly valued for its growth.
All companies have ROIC greater than 15%, however, RIMM’s high return metrics do stand out.
All companies have had little or no debt over the last 5 years. GOOG’s high current ratio and quick ratio reflect their relatively large cash/share.
In summary, GOOG seems to be priced at a fair premium given its growth and returns. APPL we would consider fairly priced if the analysts had not underestimated its growth rate (see their latest quarter’s earnings beat). However, RIMM does seem to be a standout in this group. It has high projected growth, very high returns on investment, but is priced as a value stock. Based on our analysis of these stocks' fundamentals and intrinsic value, RIMM seems to be a very attractive long-term investment.