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Subject:  Re: Some thoughts on Apple Date:  2/6/2013  10:29 AM
Author:  TMFGebinr Number:  878 of 1287

Using your reverse DFCF model, what are the market's expectations for Apple right now?

Hi Fletch,

Using last night's closing price of $457.84, TTM FCF of $47,437 MM, and a 15% discount rate, the current priced in expectations for growth to justify that price are 6.3% / 3.2% / 0% (1-5 years / 6-10 years / then on).

Historically, the company has grown FCF by 15.9% over the past year, 63.7% CAGR for 3 years, 53.2% CAGR for 5 years.

More data points:

Of the four value points James Montier points out (earnings yield at least equal to twice AAA bond yields, dividend yield at least 67% of AAA bond yields, total debt less than 2/3 tangible book value, 10-year PE no more than 16), it fails on the last point, with a 10-year PE (that is, today's price divided by the average of the last 10 years of earnings) of 36.6.

It has a P/S multiple of 2.6, which I feel is a bit on the high side (prefer to see less than 2 when considering a purchase).

It has a Piotroski score of 4 out of 9 (higher is better), failing with a decline in ROA, a decline in the current ratio, equity issuance, drop in gross margins, and drop in asset turnover.

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