Apple ($AAPL) announced quarter one results today.  With the $AAPL share price over US$200 – 52-week range US$82.33-215.59 – we decided to have a quick look.

Valuecruncher Interactive Analysts Report For Apple ($AAPL)

We have the comparator group set as Microsoft ($MSFT), IBM ($IBM), Google ($GOOG) and Hewlett-Packard($HPQ). You can change these peer companies on the site. For example you could add:

1. Research In Motion ($RIM) – Interactive Analyst Report For $RIM
2. Palm ($PALM) – Interactive Analyst Report For $PALM
3. Qualcomm ($QCOM) – Interactive Analyst Report For $QCOM

So what do we think?

Discounted Cash Flow Valuation

We have completed a discounted cash flow valuation using our interactive tools (there is a “discounted cash flow analysis” link just under the company name on the company page). We have populated our model with a mixture of consensus analyst estimates and Valuecruncher estimates. Our analysis produces a valuation of US$189.23 for $AAPL – 6.7% below the current share price. We see $AAPL overvalued at the moment. But how about compared to a peer group?

Comparison Analysis

I changed the peer group companies to $IBM, $RIM, $QCOM and $GOOG.  I am going to look at only one of the metrics we use at Valuecruncher – EV/EBITDA. Enterprise Value (EV) is simply market capitalization plus net debt [long-term borrowings less cash]. We use EV to capture the impact of debt and cash on a company’s balance sheet – market capitalization doesn’t capture different capital structures when comparing companies. EV/EBITDA shows how a dollar of profit (measured in as Earnings Before Interest Taxes Depreciation and Amortization) is being valued by the market against the comparator set.

On an EV/EBITDA basis $AAPLT is trading at 18.6x ($AAPL is being valued at 18.6x last year’s profit at the EBITDA line). A dollar of $AAPL EBITDA is worth more a dollar of $IBM (more than double), $RIM, $QCOM or $GOOG EBITDA. This is despite $AAPL making less margin at the EBITDA line than any of these comparators ($AAPL made a 22.8% EBITDA margin last year comparded with 23.0% at $IBM and 41.6% at $GOOG). There are still some steep expectations being priced into the current share price.

If we lower the $AAPL EV/EBITDA multiple to 17.5x (a slight premium to $QCOM) then this gives a share price of US$187.57 – 7.5% below the current share price. This valuation is in line with our DCF analysis.

Summary

Based on our DCF valuation – $AAPL looks overvalued. Looking at some comparators – the market is valuing $AAPL highly compared to some peers. We believe if you are investing in $AAPL at the current price – you are paying a full price and there are cheaper options available. We know that we will hear about that from the $AAPL fans out there however.

Disclosure: no positions.

It has been a crazy 15 months for the Apple ($AAPL) share price. On the 22 August 2008 $AAPL was trading at $176.79. By 16 January 2009 $AAPL had dropped to $82.33 – down over half (53% down) in under five months. Today $AAPL closed at $190.01 – up over 130% in under nine months. The graph below shows the closing prices over the period. So what do we think about $AAPL?

Valuecruncher Interactive Analysts Report For Apple ($AAPL)

We have the comparator group set as Microsoft ($MSFT), IBM ($IBM), Google ($GOOG) and Hewlett-Packard($HPQ). You can change these peer companies on the site. For example you could add:

1. Research In Motion ($RIM) – Interactive Analyst Report For $RIM
2. Palm ($PALM) – Interactive Analyst Report For $PALM
3. Qualcomm ($QCOM) – Interactive Analyst Report For $QCOM

So what do we think?

Discounted Cash Flow Valuation

We have completed a discounted cash flow valuation using our interactive tools (there is a “discounted cash flow analysis” link just under the company name on the company page). We have populated our model with a mixture of consensus analyst estimates and Valuecruncher estimates. Our analysis produces a valuation of US$176.16 for $AAPL – 7.3% below the current share price. We see $AAPL overvalued at the moment. But how about compared to a peer group?

Comparison Analysis

I changed the peer group companies to $IBM, $RIM, $PALM and $QCOM.  I am going to look at two of the metrics we use at Valuecruncher – Enterprise Value (EV)/Revenue and EV/EBITDA. Enterprise Value (EV) is simply market capitalization plus net debt [long-term borrowings less cash]. We use EV to capture the impact of debt and cash on a company’s balance sheet – market capitalization doesn’t capture different capital structures when comparing companies.

EV/Revenue shows how a dollar or revenues is being valued by the market against the comparator set. On an EV/Revenue basis $AAPL is trading at 4.5x ($AAPL is being valued at 4.5x last year’s revenues). This compares to $IBM at 1.7x, $RIM at 3.5x, $PALM at 3.4x and $QCOM at 5.8x. $AAPL’s profit margins (at the EBITDA line) are 20.9% of revenues.  A dollar of $AAPL revenues is being valued more than a dollar of $RIM revenues – despite that dollar of revenues producing less profit (on an EBITDA basis) than the $RIM revenues.  A dollar of $AAPL revenues is being valued less than a dollar of $QCOM revenues – but $QCOM produces nearly twice the profit (on an EBITDA basis) as $AAPL.  We would expect the difference between the multiples for $QCOM and $AAPL to be larger – in $QCOM’s favour. There are some big growth expectations for $AAPL – on an EV/Revenue basis there appears to be a premium being paid for $AAPL against the peer group.

If we lower the $AAPL EV/Revenue multiple to 3.75x (a slight premium to $RIM) then this gives a share price of $163.30 – 14% below the current share price.

EV/EBITDA shows how a dollar of profit (measured in as Earnings Before Interest Taxes Depreciation and Amortization) is being valued by the market against the comparator set. On an EV/EBITDA basis $AAPLT is trading at 21.51x ($AAPL is being valued at 21.5x last year’s profit at the EBITDA line). A dollar of $AAPL EBITDA is worth more than double a dollar of $IBM, $RIM or $QCOM EBITDA ($PALM is losing money at the EBITDA line).

If we lower the $AAPL EV/EBITDA multiple to 17.5x (a slight premium to $QCOM) then this gives a share price of $160.06 – 16% below the current share price.

Summary

Based on our DCF valuation – $AAPL looks overvalued. Looking at some comparators – the market is valuing $AAPL highly compared to some peers. We believe if you are investing in $AAPL at the current price – you are paying a full price and there are cheaper options available. We do recognize that there are a lot of $AAPL fans out there however.

Disclosure: no positions.

After our recent post on Microsoft ($MSFT) – people asked for a quick take on Apple ($AAPL). Here it is.

Valuecruncher Interactive Analysts Report For Apple ($AAPL)

We have the comparator group set as Microsoft ($MSFT), IBM ($IBM), Google ($GOOG) and Hewlett-Packard($HPQ). You can change these peer companies on the site. For example you could add:

1. Research In Motion ($RIM) – Interactive Analyst Report For $RIM
2. Palm ($PALM) – Interactive Analyst Report For $PALM
3. Qualcomm ($QCOM) – Interactive Analyst Report For $QCOM

$AAPL’s share price is currently trading at US$160.00. This is well up from the 52-week low of US$78.20. The graph below shows the last 12 months of closing prices.

So what do we think?

Discounted Cash Flow Valuation

We have completed a discounted cash flow valuation using our interactive tools (there is a “discounted cash flow analysis” link just under the company name on the company page). We have populated our model with a mixture of consensus analyst estimates and Valuecruncher estimates. Our analysis produces a valuation of US$161.63 for $AAPL – 1.0% above the current share price. We see $AAPL correctly valued at the moment. But how about compared to a peer group?

Comparison Analysis

I am going to look at two of the metrics we use at Valuecruncher – Enterprise Value (EV)/Revenue and EV/EBITDA. Enterprise Value (EV) is simply market capitalization plus net debt [long-term borrowings less cash]. We use EV to capture the impact of debt and cash on a company’s balance sheet – market capitalization doesn’t capture different capital structures when comparing companies.

EV/Revenue shows how a dollar or revenues is being valued by the market against the comparator set. On an EV/Revenue basis $AAPL is trading at 3.66x ($AAPL is being valued at 3.66x last year’s revenues). This compares to $MSFT at 3.08x, $IBM at 1.70x, $GOOG at 5.73x and $HPQ at 0.91x. $AAPL’s profit margins (at the EBITDA line) are 20.9% of revenues.  A dollar of $AAPL revenues is being valued more than a dollar of $MSFT revenues – despite that dollar of revenues producing just more than half the profit of the $MSFT revenues.  A dollar of $AAPL revenues is being valued twice as much as a dollar of $IBM revenues – despite that dollar of revenues producing a similar level of profit as the $AAPL revenues.  As we have previously noted – that is some big growth expectations for $AAPL.

EV/EBITDA shows how a dollar of profit (measured in as Earnings Before Interest Taxes Depreciation and Amortization) is being valued by the market against the comparator set. On an EV/EBITDA basis $AAPLT is trading at 17.51x ($AAPL is being valued at 17.51x last year’s profit at the EBITDA line). A dollar of $AAPL EBITDA is worth more than double a dollar of $MSFT, $IBM or $HPQ EBITDA. And more than a dollar of $GOOG EBITDA as well. $AAPL is trading at a higher EV/EBITDA multiple than $RIM and $QCOM as well – but it is in the same general ballpark. $RIM is trading at 15.08x and $QCOM at 16.93x.

Summary

Based on our DCF valuation – $AAPL looks correctly valued. Looking at some comparators – the market is valuing $AAPL pretty highly compared to some peers. On an EV/Revenue basis – a dollar of $AAPL revenues is worth more than a dollar of $MSFT revenues even when the dollar of $MSFT revenues produces nearly twice the profits of the $AAPL revenues. We believe if you are investing in $AAPL at the current price – you are paying a full price and there are cheaper options available.

Disclosure: no positions.