On Sept. 21, 2012, Apple’s (AAPL) stock hit an all-time high of $705.07 per share during trading. On Wednesday, almost a full six months later, the stock dropped below $400 during trading-the first time it has been in that territory since December of 2011-before rebounding slightly to close down 5.50 percent at $402.80.
Wednesday's loss is, somewhat speculatively for the moment, being blamed on the assumption that since one of the company’s largest smartphone/tablet audio-chip suppliers, Cirrus Logic (CRUS), announced that it will miss revenue estimates in its upcoming Q1 earnings statement, that Apple’s mobile sales could be on the decline.
It will have to wait until next week when Apple reports its own earnings before it can be determined whether or not its supplier’s dismal earnings preview is in any way a reflection of the state of the company’s mobile sales. In any case, the fact remains that Apple’s shares are now trading at a price-to-earnings multiple of 9 times earnings, with a forward price-to-earnings multiple of 8, figures that are both well below the S&P’s current P/E ratio of 17.49.
Furthermore, the company’s P/E growth ratio is 0.48. From a fundamental perspective, all of this indicates that Apple’s stock is cheaper than it has been in ages.
Add to this the fact that the company’s dividend yield is currently at 2.63 percent (higher than the S&P’s overall yield of 2.07 percent), which is important for two interrelated reasons. The first one is specific to Apple, who has been under significant pressure over the past few months to do something with its substantial reserve of cash. Many expect that this will take the form of an increase in dividend payouts in the very near future.
Secondly, a stock that as cheap and/or undervalued as Apple’s currently is could plausibly see shares increase (or decrease) sharply in reaction to some good news, such as the announcement of a new product, or an increase in the dividend payout. This presents an interesting set of circumstances for investors to think about.
On the S&P 500, there are 6 other stocks that have similar fundamentals. They were selected based on P/E and forward P/E ratios lower than 10, a P/E Growth ratio of less than 1, and a dividend yield of greater than 2 percent:
Western Union Co. (WU) – With a market cap of $8.35 billion, the credit services and money-wiring company currently trades at $14.68 per share. It has a P/E ratio of 8.69, a forward P/E ratio of 9.23, and a PEG ratio of 0.81, with a dividend yield of 3.41 percent.
WellPoint Inc. (WLP) – The health care provider has a market cap of $20.84 billion, with shares at $69.03. Its P/E ratio is 8.49, with a forward P/E ratio of 8.45, a PEG ratio of 0.71, and a its dividend yield is 2.17 percent.
AFLAC, Inc. (AFL) – The accident insurance provider has a market cap of $22.98 billion, with shares trading for $49.16. The P/E ratio is 8.06, with a forward P/E ratio of 8.06, and a PEG ratio of 0.84, with a dividend yield of 2.85 percent.
Phillips 66 (PSX) – The oil and gas refining/marketing company has a market cap of $35.96 billion and a share price of $57.99. It has a P/E ratio of 8.95, a forward P/E ratio of 8.27, and a PEG ratio of 0.83. The company offers a dividend yield of 2.16 percent.
Ford Motor Co. (F) – The car manufacturer has a market cap of $50.79 billion, with shares trading at $12.93. Its P/E multiple is 9.1, its forward P/E multiple is 7.74, with a PEG ratio of 0.69. Ford’s dividend yield is currently a healthy 3.09 percent.
Caterpillar Inc. (CAT) – The manufacturer of farming machinery has a market cap of $53.37 billion, with shares trading at $81.47. The company’s P/E multiple is 9.6, with a forward P/E of 8.89, and PEG ratio of0.69. Caterpillar currently offers a 2.55 percent dividend payout.
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