Apple Inc. (NASDAQ:AAPL) received a lot of attention from a substantial price movement on the NASDAQGS over the last few months, increasing to US$236 at one point, and dropping to the lows of US$207. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Apple's current trading price of US$227 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let's take a look at Apple's outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
According to our valuation model, Apple seems to be fairly priced at around 7.2% below our intrinsic value, which means if you buy Apple today, you'd be paying a reasonable price for it. And if you believe the company's true value is $244.65, then there's not much of an upside to gain from mispricing. So, is there another chance to buy low in the future? Given that Apple's share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
What kind of growth will Apple generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let's also take a look at the company's future expectations. With profit expected to grow by 42% over the next couple of years, the future seems bright for Apple. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What This Means For You
Are you a shareholder? AAPL's optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven't considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you've been keeping an eye on AAPL, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it's worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.