Ail said:
The thing with P/E is that originally it was designed as a metric to measure the value of a stock in terms of how long it would take you to recoup your investment, The problem with Apple is that they return none of those colossal earnings to their stock holders, so I'm not sure we should be using P/E to measure the real valuation of those kind of companies... I would agree you have to include the cash pile in the valuation too but once again most people doing so get the maths wrong as they value 1$ of cash in Apple's hand as 1$ of cash available to stock holder and that's incorrect as if Apple was to return that cash, for example as a big dividend like Microsoft did several years ago, taxes would kick in and it would be closer to something like 1$ on Apple's book is like 75 cents in the investors hands....... |
That's exactly why most Apple shareholders are happy that Apple hoards the money. They get a better return if Apple uses it to grow (which Apple does by using it to gain secure, favourable component supply deals) than if Apple pays a dividend.
If you read the Asymco link, Apple's cash pile is pretty much the only correlation he can find to their market cap, but even that's dipped down below the trend line. It's pretty wierd when the stock market encourages a company to sit on a bank account.
And there's a good reason why Apple's squeezing content retailers like Amazon out of the App Store. Imagine if PSN had a free download link to XBLA. You could buy XBLA games on your PS3, but all the retail earnings would go to Microsoft. Sony wouldn't see a dime. Would you really expect Sony to tolerate that situation?
"The worst part about these reviews is they are [subjective]--and their scores often depend on how drunk you got the media at a Street Fighter event." — Mona Hamilton, Capcom Senior VP of Marketing
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