Okay, things are getting silly again in the stock market. Stocks are being taken out and shot indiscriminately because of the Giant Hedge Fund Liquidation, regardless of quality. Many, if not most stocks, are now on sale.
Take Apple, which reported a great quarter yesterday but gave conservative guidance (as it usually does).
Apple closed today at a shade under $97.
Apple has 887 million shares and a market cap of $86 billion. As of the end of the most recent quarter, the company had $24.5 billion in cash and no debt. Thus, net cash per share is $27. Cash is 28% of the company's market capitalization.
The company earned $5.48 over the past 12 months. On trailing earnings, Apple is trading at 17.7x earnings.
Net cash, the stock is trading at $70 per share. Apple is trading at 12.8x trailing earnings net of cash.
Analysts are expecting the company to earn $6.50 next year. At $97, the stock is trading at 14.9x earnings. Net cash, the stock is trading at 10.8x earnings.
Let's say analysts' estimates are too high. Instead, Apple earns $6. On that number, the stock is trading at 11.7x earnings.
Right now, Apple is perhaps the greatest consumer company in the world. Well, if not the greatest consumer company, then certainly the greatest consumer technology company. 10x-12x earnings net of cash seems down right cheap to me.
Does that matter?
No, of course not. Valuation means squat in the short term. The stock could fall to $50 for all I know, especially given the irrational selling that is hammering the market almost every day.
And I'm not buying the stock now, nor am I recommending anyone buy anything at the moment (even though I have been buying).
But great values are being created all over the market for anyone having a time horizon longer than a week.