The past year has been an exceptional time for the US markets. Only 3 years ago, America was tanking into a near depression and now we are in a period of decreasing unemployment rates, increasing confidence, and a want for my risky assets by investors. High Tower Advisors Michael Bapis reported to CNBC, "There's more of an appetite for risk… People were so conservative last year. Now there's an appetite for risk." Though investors may clamor to the newest companies on the street, the two most stereotypical stocks on the market are poised for exceptional growth both on a corporate level and on a stock price level, due to low valuations. This has created an environment where Google (NASDAQ:GOOG) and Apple (NASDAQ:AAPL) are trading at both low price to earnings (NYSE:PE), and price/earnings to growth rate (NYSE:PEG) values. The numbers below speak for themselves in proving that GOOG and AAPL are poised for continued growth on the heels of obtaining more realistic market valuations.
GOOG and AAPL are cheap by the numbers:
Forward PE Ratio: 11.76 (sector average is 16.25)
5-Year Expected PEG Value: .74
Trading Range, Past 12 Months: $473.02-642.96
- Fundamentals: In Larry Page's earnings report a few weeks ago, he reported revenue increasing by 25% over last year's fourth quarter results as well as delivering $10 billion in sales for the first time. Page stated, "I am super excited about the growth of Android, Gmail, and Google+, which now has 90 million users globally - well over double what I announced just three months ago." The type of growth that has been seen in Google+ is evidence of the Mecca GOOG has become. GOOG Android platform represents 47% of the current mobile market share and the core of GOOG business is operating at exceptional levels. As evidenced by the strong PEG value of .74, the company is undervalued and has the potential to grow in value and market share over the coming years and mature to its real market-value.
Forward PE Ratio: 9.71 (sector average is 16.25)
5-Year Expected PEG Value: .56
Trading Range, Past 12 Months: $310.50-458.99
- Fundamentals: Apple represents an incredible stock story of a company that has been to come up with idea after idea and erode the market share of its largest competitors year after year. When AAPL reported earnings last months, the Los Angeles Times reported, "Apple's quarterly profit more than doubled and revenue surged 74% to a record $46.3 billion as the company sold more iPhones, iPads and Mac computers than in any quarter in its history." This level of performance warrants a PE multiple of higher of 9.71 and a PEG value closer to 1 than .5. Only 5 years ago, AAPL traded at a PE ratio of 39.1, marking the steady decline in PE the company has traded at. This marks an exceptional opportunity for investors to invest in one of America's strongest and most promising companies at a low valuation. There is exceptional room for stock-price growth from these numbers.
Conclusion: Do not allow the seemingly high stock prices to keep you away from these two companies that are, by the numbers, undervalued and overperforming. Both GOOG and AAPL represent exceptional opportunities for growth. Just because they are the stereotypical "two" does not mean they are unworthy of your money.The aforementioned numbers speak for themselves...
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.