A Look at Apple’s Blowout Earnings

All eyes on Wall Street seemed to be focused on Apple‘s ($AAPL) earnings report. Once again, the company did not disappoint. Apple earned an astounding $7.79 per share for the second quarter.

It’s almost difficult to put these numbers into context. Shares of Apple are up over 60-fold in a little over eight years. That means that the shares have doubled, on average, every 17 months.

If you had bought Apple 13 years ago, you’d now be making all of your money back every three months. That means the company made more money in the second quarter than the entire company was worth in 1998.

Here’s a look at Apple’s share price along with its trailing 12-month earnings-per-share. The blue line is Apple’s stock and it follows the left scale. The yellow line is earnings and it follows the right scale. The two lines are scaled at a ratio of 20-to-1, so whenever the lines cross that means Apple’s P/E Ratio is exactly 20.

There’s no deep reason why I chose a ratio of 20. It just seemed to provide the graph the best fit. The red line is Wall Street’s forecast. The problem is that yesterday’s earnings report was so strong that it made a joke of Wall Street’s forecast, so please don’t pay too much attention to the red line. I expect to see those projections increased dramatically.

I also think it’s interesting that Apple’s earnings growth was barely dented by the recession. Also, the stock’s valuation is hardly extreme, at least based on earnings. Just a month ago, Apple closed at $315 per share which was less than 13 times earnings.

Posted by on July 20th, 2011 at 9:41 am


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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