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The Apple (AAPL) Valuation Chart Every Tech Investor Should See

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Shares of Apple (AAPL - Free Report) dipped into the red in early morning trading Wednesday, falling slightly off the all-time highs the stock has been trading at over the past few days. Still, the past month or so has once again proved that Apple investors are willing to shrug off short-term headwinds to continue pouring money into this consumer electronics behemoth.

The Cupertino, California-based company reported lower-than-expected iPhone sales in its most recent quarter, and all signs point towards its special-edition iPhone X device being less desired than investors originally hoped. To make matters worse, that news was quickly followed by the introduction of market-wide volatility that threatened to end tech’s run as the hottest sector on Wall Street.

Apple shares dropped nearly 14% from their mid-January peak before rebounding and eventually touching new highs by the end of February. Despite slightly-disappointing iPhone sales, the market reaffirmed AAPL’s status as a long-term investment in both the both the company itself, and the overall health of the global consumer economy.

It was not too long ago that Apple was everyone’s favorite growth stock, rapidly outpacing the broader market nearly every year and skyrocketing on the back of every new product announcement. But the stock simply does not trade like that anymore—and in fact, its recent trend feels much more like that of an old-school value stock.

But do the company’s actual valuation metrics support this sentiment? Here’s a look at the company’s Forward P/E over the past year versus the average of our entire “Computer and Technology” sector:

As we can see, AAPL is currently trading at a noticeable discount compared to the rest of our tech group right now. The company’s Forward P/E is also significantly lower than that of the S&P 500, which currently holds an average P/E of about 17.4.

Apple is sporting a “B” grade for Value in our Style Scores system right now. On top of its attractive P/E, the stock has an impressive PEG ratio of 1.4. We also know that Apple is quite the cash cow, generating a staggering $11.33 in cash per share. Nevertheless, value investors might raise an eyebrow at AAPL’s relatively-high P/S ratio of 3.8.

In many ways, Apple does look undervalued compared to the broader market, as well as the tech sector as a whole. But here at Zacks, valuation metrics are not the only figures we look at when trying to find strong stocks.

Our proven Zacks Rank system puts an emphasis on earnings estimates and estimate revisions. Apple is a Zacks Rank #3 (Hold), implying that something within these trends is holding the stock back from being one of our stronger value options right now.

Interestingly, we have seen impressive revision activity for the company’s full-year earnings estimates recently. The Zacks Consensus Estimate for this period has moved 25 cents higher over the past 60 days, thanks in part to nine positive revisions against just one negative revision.

However, we have seen more negative revisions than positive revisions for Apple’s current-quarter earnings estimates, which could indicate that analysts are hesitant about the company in the near term.

Want more market analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!

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