USA Today examined the question Thursday of whether or not to invest in Apple Computer, offering readers a four step process for evaluating the stock. In his Ask Matt column, Matt Krantz came up with mixed results from that process, with some factors pointing to AAPL having room to grow, while others suggest that the risk for investors is high.
Mr. Krantz told readers to ask four basic questions: 1.) Measure the stockis risk and reward. 2.) Examine the stockis earnings multiple. 3.) Calculate the companyis value using forecasted future cash flows. 4.) Check the USA Today Stock Meter score.
From those questions, Mr. Krantz found that Apple has performed well over the last 21 years -- up 33% per year -- but that the risk inherent in that performance was higher than in other stocks. He didnit point out that the lionis share of that growth has been in the last 3-4 years.
He also told readers that for Apple to continue to have more growth in its stock, the company would have to continue to have hit products and profit margins that exceed historical profit margins.
"By doing this analysis," he concluded, "we can see how difficult the decision on Appleis stock is. Apple is a miracle stock. Its products are incredibly popular and its profitability is stellar. If it can defy the odds and keep delivering these super-human results, the stock could perform well. But rationally, the odds are not in Appleis favor."
AAPL traded lower in Thursday early afternoon trading at $72.91 per share, a loss of $2.51 (-3.33%).
*In the interest of full disclosure, the author holds a small share in AAPL stock that was not an influence in the creation of this article.