Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Apple Inc. -- Ignore unavailable to you. Want to Upgrade?

To: Doren who wrote (38716)	12/19/2003 2:57:04 AM
From: Don Green	Read Replies (2) \| Respond to of 213173

"Why does the P/E appear to be so high " The same reason the stock's price is not much higher! Apple's earnings were shockingly small.

To: Doren who wrote (38716)	12/19/2003 2:05:10 PM
From: Kip S	Read Replies (1) \| Respond to of 213173

Thanks to everyone for their thoughts. Doren, The PE is very high because earnings were very low. Examine the link you included and you see EPS (ttm--that's trailing twelve months) of 18.5 cents, although I think the actual number might be a tad higher than that. 19.92 price/.185 ttm EPS gives a PE of about 108. A more useful way to look at PE--and this is particularly true in a period like the present when we are coming out of a recession and earnings are atypically low or even negative--is to calculate a forward-looking PE. Say Apple is expected to earn 50 cents a share this year, a bit optimistic. Then the forward-looking PE is 19.92/.50 or about 40. If you choose to net out the cash and short-term investments of somewhere around 12.25 per share, then the "PE net of cash" is 19.92 - 12.25/.50 of predicted earning is around 15. Whether this is the right way to look at the PE or not is somewhat debatable, but the trailing PE is pretty much irrelevant, especially around a turning point in the economy. Needless to say, whether the PEs of 40 or 15 are "high" or "low," and whether Apple is a buy or a short depends on future performance of the company. Neal has a good point in that Apple will add a bit to earnings when interest rates rise. However, what we all want to see are sustainable increase in revenue and earnings from operations. Long answer to a short question. Sorry. Kip