Is There Now An Opportunity In Apple Inc. (NASDAQ:AAPL)?

By
Simply Wall St
Published
November 29, 2021
NasdaqGS:AAPL
Source: Shutterstock

Today we're going to take a look at the well-established Apple Inc. (NASDAQ:AAPL). The company's stock saw a double-digit share price rise of over 10% in the past couple of months on the NASDAQGS. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s take a look at Apple’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for Apple

Is Apple still cheap?

According to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average, the stock currently looks expensive. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Apple’s ratio of 27.77x is above its peer average of 14.33x, which suggests the stock is trading at a higher price compared to the Tech industry. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since Apple’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

Can we expect growth from Apple?

earnings-and-revenue-growth
NasdaqGS:AAPL Earnings and Revenue Growth November 30th 2021

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with a relatively muted profit growth of 3.1% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Apple, at least in the short term.

What this means for you:

Are you a shareholder? AAPL’s future growth appears to have been factored into the current share price, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe AAPL should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on AAPL for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive growth outlook may mean it’s worth diving deeper into other factors in order to take advantage of the next price drop.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. In terms of investment risks, we've identified 2 warning signs with Apple, and understanding these should be part of your investment process.

If you are no longer interested in Apple, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.

Make Confident Investment Decisions

Simply Wall St's Editorial Team provides unbiased, factual reporting on global stocks using in-depth fundamental analysis.
Find out more about our editorial guidelines and team.