Is Now The Time To Buy Apple?

Updated: 

I'm always searching for shares that can help ordinary investors like you make money from the stock market.

So right now I am trawling through the market and giving my verdict on as many large-cap shares as I can. Simply put, I'm hoping to pinpoint the very best buying opportunities for today's uncertain times.

Today I am looking at Apple (NASDAQ: AAPL.US) to determine whether you should consider buying the shares at $500.

I am assessing each company on several ratios:

Price/Earnings (P/E): Does the share look good value when compared against its competitors?

Price Earnings Growth (PEG): Does the share look good value factoring in predicted growth?

Yield: Does the share provide a solid income for investors?

Dividend Cover: Is the dividend sustainable?

So let's look at the numbers:

Stock Price 3-yr EPS growth Projected P/E PEG Yield 3-yr dividend growth Dividend cover
Apple $500 191% 10 0.9 2.1% N/A 17

The consensus analyst estimate for this year's earnings per share is $50 (11% growth) and dividend per shareis $10.60 (290% growth).

Trading on a projected P/E of 10, Apple appears significantly cheaper than its peers in the Computer Hardware sector, which are currently trading on an average P/E of around 20.

In addition, Apple's relatively low P/E and double-digit growth rate give a PEG ratio of around 0.9, which implies the share price looks cheap for the near-term earnings growth the firm is expected to produce.

Apple offers a 2.1% yield, which is forecast to rise quickly next year. However, Apple started paying a dividend only last year so it is not possible for me to calculate my usual three-year dividend growth rate.

Lastly, Apple's dividend is currently covered 17 times, leaving plenty of room for further dividend growth.

Is now the time to buy Apple?

Apple has revolutionised the tablet, personal music, laptop and PC markets over the last few years, but now the company is being shunned by investors over worries about falling demand for its products.

However, I believe these worries are overdone. You see, the anxiety originates from Apple's suppliers, which have reported lower-than-expected orders for the screens used in Apple's iPad. This has led many analysts to conclude that demand for Apple's products must be falling.

That said, I believe there are many other explanations for this reduction in orders. In particular, it is well known that Apple's newest tablet, the iPad mini, is selling well and still enjoys a week-long waiting list. As a result of this high demand, there has been lower demand for the full-size iPad -- resulting in lower screen orders.

These worries aside, Apple still has a large profit margin on all of its products, a huge cash balance of more than $121 billion, and a 53% share of the global tablet market.

In addition, Apple recently announced that it was going to start offering 12- and 24-month finance plans on its products in China, to boost demand in its largest market.

In conclusion, despite worries about falling demand for Apple's products, the company still has a market-leading position and a very strong business model. So overall, I believe now looks to be a good time to buy Apple at $500.

More FTSE opportunities

As well as Apple, I am also positive on the large-cap shares highlighted in "8 Dividend Plays Held By Britain's Super Investor". This exclusive report reveals the favourite income stocks owned by Neil Woodford -- the British investing legend whose portfolios have thrashed the UK's FTSE index by 200% during the 15 years to October 2012.

The report, which explains the full investing logic behind Mr Woodford's market-trouncing strategy and his preferred blue chips, is free to all private investors. Just click here for your copy. But do hurry, as the report is available for a limited time only.

In the meantime, please stay tuned for my next verdict!


SPONSORED FINANCIAL CONTENT