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Apple's Valuation Metrics Are Much Lower Than Other $500 Billion Market Cap Companies

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Apple closed at $519 on December 17 for a market capitalization of about $493 billion.  While there seems to be very strong demand for iPhones and iPads the stock has pulled back from its high of $705 when it had a market cap of about $670 billion.

I have calculated Apple’s market cap to revenue ratio and PE multiple since the stock has around a $500 billion market cap that other companies achieved during the tech bubble but have since had major pullbacks.   It also compares the valuation metrics for Cisco, Intel, Microsoft and GE when their stocks hit high points in 1999 and 2000.

As you can see Apple's PE is reasonable at 11.8x (based on my calendar 2012 EPS estimate of $43.80), is lower than the S&P 500’s PE of 14x and when using an estimated $50 in earnings for calendar 2013 its PE is 10.4x.  Its Market Cap to Revenue ratio (3.0x on calendar 2012 revenue and 2.4x on my calendar 2013 estimate) is also reasonable.  Even when the stock was at $705 it was trading at 14.1x or almost the same as the current S&P 500 multiple and had a 3.3 market cap to 2013 revenue estimate.

When compared to the other companies that achieved a $500 billion or greater market cap Apple’s PE and market cap to revenue ratios are much lower than when Cisco, Intel, Microsoft and GE’s were at their peaks in 1999 and 2000.

T12 Mth
# of shares Mkt. Cap. Revenue Mkt. Cap T12 Mth
Peak stock price Price (mil.) ($ bil.) ($ bil.) Revenue EPS PE
Apple Dec. 17, 2012 $518.83 950 $493 $162 3.0 $43.80 11.8
Cal. 2013 $518.83 950 $493 $202 2.4 $50.00 10.4
Sept. 21, 2012 $705.00 950 $670 $202 3.3 $50.00 14.1
Cisco March 27, 2000 $80.06 6,944 $556 $15 37.1 $0.72 111
Intel Aug. 31, 2000 $74.87 6,719 $503 $29 17.1 $2.11 35
Microsoft Dec. 27, 1999 $119.12 5,330 $635 $22 29.4 $1.59 75
GE Aug. 28, 2000 $60.00 9,984 $599 $112 5.4 $3.22 19
S&P Dec. 17, 2012 1,430 102.00 14.0
Previous Highs
S&P March 24, 2000 1,527 53.92 28
S&P October 9, 2007 1,565 89.31 18

Additionally Apple has 25% of its market cap in net cash vs. Cisco and Intel at 3% and Microsoft at 7% when at their highs.  Note that if Apple were to bring all of its international cash and investments back to the US, pay a full 35% tax and set aside $20 billion the company would still have $82 per share in excess cash or 16% of its market cap.

Short-term Long-term Net cash % cash
($ mil.) Cash Invest. Invest. Debt = Net cash per share to Mkt. Cap.
Apple $10,746 $18,383 $92,122 $0 $121,251 $128 25%
Cisco $3,542 $1,111 $10,419 $0 $15,072 $2 3%
Intel $6,434 $7,170 $4,548 ($946) $17,206 $3 3%
Microsoft $3,531 $23,358 $18,281 $0 $45,170 $8 7%
GE (Difficult to determine due to financing business)

I’m not too concerned that Apple’s stock price will mirror the decline that happened to those stocks since their valuations were truly at bubble levels.

Disclosure: My family and I own Apple shares.

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