Last Friday Apple Inc.’s (NASDAQ: AAPL) stocks were trading at an all time high of $120. This was a really exciting moment as the company had outperformed investors’ expectations; moreover if we adjust for the recent stock split the values reach $840. This achievement can be associated with the 1st quarter’s results for the fiscal 2015 which show high earnings and revenues.
Although the results prove to be favorable for everyone and investors must be tempted to withdraw their profits immediately and why wouldn’t they be? After all the company was trading at recorded 67% high values for the last 12 months and seemed a nice time to cash out. However, here are a few reason investors should be so quick in selling these stocks.
First of all, if we take a close at Apple’s (NASDAQ: AAPL) stock, we can see that the stocks were also trading fine before the announcement of Q1 earnings. The price to earnings ratio was as 18.2. The stocks seem quiet conservative and this would allow a steady cash flow. However, after the announcement the new earnings to price ration is 16.2.
This lower price to earnings ratio has rendered Apple’s (NASDAQ: AAPL) stocks to look cheaper again and then if compared to S&P 500 index the price to earnings ratio 19.2. So we can say that is stock conservatively priced no matter we view it. Then we can see a large portion of the company’s (NASDAQ: AAPL) earnings per share growth can be associated with its higher share repurchase rates.
The growth rate of earnings per share which rose as a result of lesser number of shares was in the range of 48% year over year quarterly growth. In fact this growth rate significantly more than what Apple (NASDAQ: AAPL) proposed previously i.e. 38%. Hence, we can say that this growth rate is a result of the reduction in number of shares. Moreover, this trend of rising quarterly results can be seen for last few years and one can witness growth rates of 8 to 10 percent every year.
And following this trend Apple may prefer the repurchases of shares in years ahead, besides it seems legitimate as the company has huge reserves of cash and a very smooth and high cash flow. Then we can see that Apple (NASDAQ: AAPL) watch is not included in all this assessment and its results are yet to be added.
Moreover, Apple has become the most preferred gift brand in China and as the Chinese New Year is just around the corner and Apple’s watch is also due to release in the region the company has more to accomplish and there are rumors that the watch may increase sales by 5%. However, nothing yet can be said but even if the Apple watch fails this won’t cause any harm to this growth rate and its positive outcome will put a nice smile on our investors’ faces.
