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Simple Conservative Valuation On Apple

Jan. 13, 2014 10:44 AM ETAAPL
Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Seeking Alpha Analyst Since 2013

Value investor running a small investment firm in Borneo.

Apple EPS

Year EPS
2011 27.68
2012 44.15
2013 39.75
2014 39.75*

*Estimation on 2014 EPS.

To come up with a conservative 2014 EPS estimation, we ignored the general analyst consensus figure for 2014 EPS (around $42-$44) and used the 2013 EPS instead as our 2014 EPS estimation. That is to say we forgo the might of the new Iphone 5S/5C in our estimation as well as the much-hyped China Mobile deal and the various forecasts on increased earnings coming from China.

Valuation

P/E EPS ($) Value ($)
13 39.75 516.75
15 39.75 596.25
17 39.75 675.75

Assuming EPS for 2014 to be close to our conservative estimation of $39.75 (That is to say no growth!), we get a value of $516.75 at P/E 13.
At a more realistic P/E of 15 and we get a valuation of $596.25.

Conclusion

Apple is currently trading at P/E 13.5 ($536.25) and that is basically saying the market is pricing Apple with no growth in earnings at all. Our conservative valuation gives a range between $516 - $596.25 (P/E 15) and with the share price currently at the lower end of it, we see a great business with competitive advantage and loyal customer base, strong balance sheet and a ~2.3% dividend yield. BUY

Disclosure: I am long AAPL, .

Additional disclosure: I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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