Tag Archives: P/E Theory

AAPL: Ray Mertola. Good study of basics.

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AND GOOD COMMENTS AT THE END

Apple, Inc. (AAPL) currently sports a trailing twelve-month P/E of 10X. Based upon the discounted cash flow principles underpinning the concept of the Price/Earnings multiple, this makes little sense unless one believes the company no longer has an ability to generate incremental earnings and cash.

This article will explore the thesis in four parts:

  • How the P/E ratio relates to Discounted Cash Flow methodology
  • What P/E multiple relates to a “no growth” stock versus a growing enterprise
  • How the Apple stock P/E has decoupled itself from past and projected earnings metrics
  • A summary and concluding thoughts as to what’s going on

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