We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Can Apple (AAPL) be a Suitable Value Pick at the Moment?
Read MoreHide Full Article
Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Apple Inc. (AAPL - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Apple has a trailing twelve months PE ratio of 14.75. This level compares favorably with the market at large, as the PE ratio for the S&P 500 comes in at about 20.11.
If we focus on the long-term PE trend, Apple’s current PE level puts it slightly above its midpoint over the past five years, with the number having risen rapidly over the past few months. Hence, this does not provide us with a conclusive direction as to the relative valuation of the stock in comparison to its own historical trend.
Meanwhile, the stock’s PE compares favorably with the Zacks classified Computer & Technology sector’s trailing twelve months PE ratio, which stands at 22.08. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Apple has a forward PE ratio (price relative to this year’s earnings) of just 13.70, so it is fair to say that a slightly more value-oriented path may be ahead for Apple stock in the near term too.
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, Apple has a P/S ratio of about 3.05. This is a bit higher than the Computer & Technology sector’s average, which comes in at 2.96 right now. In fact, over the last year, Apple’s figure has been quite close to the sector’s average, as we can see in the chart below:
However, the current level lies near to the median of the stock’s own historical trend (which stands at 2.93). This again does not provide us with any conclusive direction as to the relative valuation of the stock in comparison to its own trend.
Broad Value Outlook
In aggregate, Apple currently has a Zacks Value Style Score of ‘B’, putting it into the top 40% of all stocks we cover from this look. This makes Apple a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for Apple is just 1.20, a level that is far lower than the industry average of 5.06. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Clearly, AAPL is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Apple might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of ‘D’ and a Momentum score of ‘F’. This gives AAPL a Zacks VGM score—or its overarching fundamental grade—of ‘D’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been trending downwards slightly. The current quarter has seen one estimate go higher in the past sixty days compared to three lower, while the full year estimate has seen one upward revision and eight downward revisions in the same time period.
This has had just a small impact on the consensus estimate though as the current quarter consensus estimate has inched lower by 0.3% in the past two months, while the full year estimate has declined nearly 2%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
This somewhat dull trend is why the stock has just a Zacks Rank #3 (Hold) and why we are looking for in-line performance from the company in the near term.
Bottom Line
Apple forms a part of the Zacks Computer-Mini industry. The industry is highly competitive and thus Apple faces significant competition in most of its operating markets from respective segment leaders like Hewlett-Packard, Google, Samsung, etc. Moreover, the demand for high-end devices has been soft recently, owing to global macroeconomic weakness, especially with currency volatility and declining commodity prices in some key regions across the globe.
In fact, over the past two years, the Zacks Computer-Mini industry has clearly underperformed the broader market, as you can see below:
Apple is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, with a sluggish industry rank (Bottom 14% out of more than 250 industries) and a Zacks Rank #3, it is hard to get too excited about this company overall.
So, value investors might want to wait for estimates and analyst sentiment to turn bullish in this name first, but once that happens, this stock could be a compelling pick.
Zacks' Top Investment Ideas for Long-Term Profit
How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>
Unique Zacks Analysis of Your Chosen Ticker
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
Can Apple (AAPL) be a Suitable Value Pick at the Moment?
Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Apple Inc. (AAPL - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Apple has a trailing twelve months PE ratio of 14.75. This level compares favorably with the market at large, as the PE ratio for the S&P 500 comes in at about 20.11.
If we focus on the long-term PE trend, Apple’s current PE level puts it slightly above its midpoint over the past five years, with the number having risen rapidly over the past few months. Hence, this does not provide us with a conclusive direction as to the relative valuation of the stock in comparison to its own historical trend.
Meanwhile, the stock’s PE compares favorably with the Zacks classified Computer & Technology sector’s trailing twelve months PE ratio, which stands at 22.08. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Apple has a forward PE ratio (price relative to this year’s earnings) of just 13.70, so it is fair to say that a slightly more value-oriented path may be ahead for Apple stock in the near term too.
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, Apple has a P/S ratio of about 3.05. This is a bit higher than the Computer & Technology sector’s average, which comes in at 2.96 right now. In fact, over the last year, Apple’s figure has been quite close to the sector’s average, as we can see in the chart below:
However, the current level lies near to the median of the stock’s own historical trend (which stands at 2.93). This again does not provide us with any conclusive direction as to the relative valuation of the stock in comparison to its own trend.
Broad Value Outlook
In aggregate, Apple currently has a Zacks Value Style Score of ‘B’, putting it into the top 40% of all stocks we cover from this look. This makes Apple a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for Apple is just 1.20, a level that is far lower than the industry average of 5.06. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Clearly, AAPL is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Apple might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of ‘D’ and a Momentum score of ‘F’. This gives AAPL a Zacks VGM score—or its overarching fundamental grade—of ‘D’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been trending downwards slightly. The current quarter has seen one estimate go higher in the past sixty days compared to three lower, while the full year estimate has seen one upward revision and eight downward revisions in the same time period.
This has had just a small impact on the consensus estimate though as the current quarter consensus estimate has inched lower by 0.3% in the past two months, while the full year estimate has declined nearly 2%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Apple Inc. Price and Consensus
Apple Inc. Price and Consensus | Apple Inc. Quote
This somewhat dull trend is why the stock has just a Zacks Rank #3 (Hold) and why we are looking for in-line performance from the company in the near term.
Bottom Line
Apple forms a part of the Zacks Computer-Mini industry. The industry is highly competitive and thus Apple faces significant competition in most of its operating markets from respective segment leaders like Hewlett-Packard, Google, Samsung, etc. Moreover, the demand for high-end devices has been soft recently, owing to global macroeconomic weakness, especially with currency volatility and declining commodity prices in some key regions across the globe.
In fact, over the past two years, the Zacks Computer-Mini industry has clearly underperformed the broader market, as you can see below:
Apple is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, with a sluggish industry rank (Bottom 14% out of more than 250 industries) and a Zacks Rank #3, it is hard to get too excited about this company overall.
So, value investors might want to wait for estimates and analyst sentiment to turn bullish in this name first, but once that happens, this stock could be a compelling pick.
Zacks' Top Investment Ideas for Long-Term Profit
How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>