Mercel - 30 July 2010 05:33 AM

Apple II+ - 30 July 2010 04:09 AM

The forward PE being a better valuation metric than the trailing PE, shouldn’t we look at what that was at the low?

 

If only WS was listening…

If only we know what the future earnings are ...

My guess is around $200.00. I am assuming next years earnings close to a minimum of $18.00 a share. OK, even if you concede to $16.00 a share then multiply it by 10.5 you get 189 or 163.2.
Add approx. $50.00 in cash you get between 239 and 213.2.
Hence my guess remains $200.

deagol - 25 July 2010 10:49 PM

Apple’s trailing PE was NOT 10.5 in Jan 2009, because Apple had not restated to non-subs accounting until Jan 2010. Apple’s ttm EPS (calendar 2008) at the time was $5.38. At the lowest price of $78, the trailing PE would be 14.5. I don’t think there were too many analysts, or investors, who were appropriately valuing AAPL using non-GAAP or non-subs accounting measures.

Been traveling the past few days - hence the delayed response… Deagol, you’re right, most folks were not accurately taking into account the the non-GAAP numbers, but I wanted to get a sense of what it was for those of us that were - at this point, it’s all speculation since nobody knows what it would have been had AAPL been reporting just one set of numbers.

On a side note, I stopped by a store in Amsterdam today and learned that T-mobile (the exclusive carrier), started and stopped presales for iPhone4 in just a day last week and the demand for today’s launch is huge. So, let’s keep the faith…the numbers will eventually win. Hopefully, with 17 countries launching today and this being the first launch since the antenna issue, we get some announcement from Apple on Monday…

Apple II+ - 30 July 2010 04:09 AM

deagol - 25 July 2010 10:49 PM

Apple’s trailing PE was NOT 10.5 in Jan 2009, because Apple had not restated to non-subs accounting until Jan 2010. Apple’s ttm EPS (calendar 2008) at the time was $5.38. At the lowest price of $78, the trailing PE would be 14.5. I don’t think there were too many analysts, or investors, who were appropriately valuing AAPL using non-GAAP or non-subs accounting measures.

The forward PE being a better valuation metric than the trailing PE, shouldn’t we look at what that was at the low?

Normally you have to look at estimated earnings for a forward PE. But with the benefit of hindsight we can see that, when AAPL was at $78, the actual earnings a year later were about $10.24 (including restated earnings). So the forward PE back in Jan 2009 was about 7.6. What a bargain that was!

I’m new at this. Is it helpful to look at it this way?

A2+

I agree it’s a better valuation metric, even with the pesky problem of now having to predict the future. However, investors only recourse on this (other than their own gutsy research) is Wall Street analysts. The forward PE obtained when using the forward consensus is remarkably stable. I remember at one point in early Jan09 when the analyst consensus for FY09 was as low as $5.00. Here’s my very first blog post, where I report the consensus was $5.05 a week before earnings. That’s precisely when the stock made the $78 low. So, the lowest forward PE based on analysts consensus, back then when the world was ending, was 15.6x. This Jan almost got us there at the $190 level, and I think since May we’ve gone below that multiple a few times, like right now.

Check out this tool from Ameritrade:
http://research.tdameritrade.com/public/stocks/earnings/earnings.asp?symbol=aapl

Click on “Estimate Trends” and Show: Annual. Hover the pointer over the graph in early ‘09 and other periods. The next FY EPS only works as a forward looking EPS between Oct and Jan. For other times in the year you’ll have to use some math with the quarterly estimates and the already reported periods. Hope it helps.

Mace - 30 July 2010 09:56 AM

Mercel - 30 July 2010 05:33 AM

Apple II+ - 30 July 2010 04:09 AM

The forward PE being a better valuation metric than the trailing PE, shouldn’t we look at what that was at the low?

 

If only WS was listening…

If only we know what the future earnings are ...

Mace, we “know”, sorta. At least much better than WS. The real problem is, it takes a whole year to verify. Who wants to wait a year after you hit the ball, to see if it’s a home run? Not today’s “investors”.

deagol - 30 July 2010 10:43 AM

Apple II+ - 30 July 2010 04:09 AM

deagol - 25 July 2010 10:49 PM

Apple’s trailing PE was NOT 10.5 in Jan 2009, because Apple had not restated to non-subs accounting until Jan 2010. Apple’s ttm EPS (calendar 2008) at the time was $5.38. At the lowest price of $78, the trailing PE would be 14.5. I don’t think there were too many analysts, or investors, who were appropriately valuing AAPL using non-GAAP or non-subs accounting measures.

The forward PE being a better valuation metric than the trailing PE, shouldn’t we look at what that was at the low?

Normally you have to look at estimated earnings for a forward PE. But with the benefit of hindsight we can see that, when AAPL was at $78, the actual earnings a year later were about $10.24 (including restated earnings). So the forward PE back in Jan 2009 was about 7.6. What a bargain that was!

I’m new at this. Is it helpful to look at it this way?

A2+

I agree it’s a better valuation metric, even with the pesky problem of now having to predict the future. However, investors only recourse on this (other than their own gutsy research) is Wall Street analysts. The forward PE obtained when using the forward consensus is remarkably stable. I remember at one point in early Jan09 when the analyst consensus for FY09 was as low as $5.00. Here’s my very first blog post, where I report the consensus was $5.05 a week before earnings. That’s precisely when the stock made the $78 low. So, the lowest forward PE based on analysts consensus, back then when the world was ending, was 15.6x. This Jan almost got us there at the $190 level, and I think since May we’ve gone below that multiple a few times, like right now. .

So what’s your take on why the forward PE now is lower than what it was when world was coming to an end? More importantly, if the market corrects 5%+ in the nest term, which is not out of the realm of possibility, does AAPL continue to underperform and get in the 220s near term? If not, any near term things that could change the current negative sentiment in the stock?

That’s a great tool. I also like that it shows FY 2012 estimates, which I haven’t seen before. Thanks.

I’d rather use actual forward earnings to compute past forward PE’s and only use estimates where needed for present and future quarters. And by actual I mean Apple’s restated earnings so that the comparisons of past and present forward PE’s are based on the same accounting. That way we also avoid the bizarre comparison where we now appear to be below the “lowest” forward PE when the world was ending, when the apples-to-apples comparison is really to a low forward PE of about 7.6.

So using 7.6 and the consensus FY 2011 estimate of $17.44, we have a end of the world part deux low of about $133. That consensus is almost certainly too low, however. But that also gives some leeway in this potential low for things getting even worse if things should go south again.