Tuesday, April 10, 2012

Fiscal 2Q 2012 Final Estimates

At today's closing price of $628.44, AAPL is trading at a 10.4 multiple on my forward EPS (8.5x ex-cash).

The valuation metrics provided below are intended to track the market price of the shares at the given timeframes, and thus exclude any dividend paid up to that point in time because the dividend is subtracted from the cash balance, as it should. However, because my underlying theory is that shares should be (roughly) valued on a forward-one-year basis, to compensate for this one needs to add back into the value the next 12-months worth of dividends.

For example, the current fair value is based on 10 times the EPS estimate of $60.39 for the next 12 months which gives $604, plus the estimated cash balance at the end of the next 12 months of $165/sh (which already excludes any dividends paid over that period), and adding back the $8 worth of dividends paid over the next 12 months which a buyer today would in fact be entitled to, resulting in a $777 fair value. The one-year target is computed similarly given the annual EPS, dividends and cash balance for the 12 months ending 2 years from now.

I consider the "trailing" metric relevant for the past 3 to next 3 months, the "fair value" metric relevant for roughly the next 3 to 9 months, and the "1yr target" metric relevant for roughly the next 12-18 months. Of course this is all my own subjective/empirical sense.