Apple Stock reaches new high, or is it a new low
With AAPL cracking the $400 barrier for the first time last week, and hovering since in the high 390s, it’s a shock to read Horace Dediu’s assessment. Adjusted for the massive earnings and growth, Apple’s share price has actually reached a new low.
The reason is simple. Apple’s growth is so phenomenal that it has vastly outstripped the share price, despite the new highs. The P/E (profit/earnings) ratio is about 15. He shows that not only is the P/E ratio declining, but it is now the lowest since the great recession. Excluding cash, Apple’s P/E on Friday was 12.4 and, on a forward basis, is could be as low as 7.
Some commentators on the Asymco blog suggest the share price ought to be much higher in view of the low P/E. Others wonder if Apple is being penalised by the dividend brigade (Apple has not paid a dividend since 2005, something that is very unusual in such a successful company).
Yet others wonder if a stock split, thus reducing the value of one share, would encourage a rise. All are possible, but there is something definitely strange about Apple’s low share price in relation to the booming business and future potential.