AAPL Hits All-Time High, AAPL Valuation Metrics, Observations on Big Tech Valuation
We begin today’s update with my thoughts on AAPL shares hitting all-time highs. The discussion will then turn to an examination of AAPL valuation metrics (forward P/E, EV/FCF, and free cash flow yield). In addition to looking at Apple’s valuation metrics, there is value found in taking a broader look at how Big Tech is trading from a valuation perspective. We will keep our focus to free cash flow / enterprise value. While there may not be one gold standard valuation metric that all market participants prioritize, free cash flow remains my go-to metric. The data removes much of the noise that is found with income statement line items.
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AAPL Valuation Metrics, Apple's Improving Valuation, Apple Close to $3 Trillion Market Cap (Again)
Hello everyone. The update kicks off with an examination of AAPL valuation metrics (forward P/E, EV/FCF, and free cash flow yield). We then go over Neil’s thoughts on why Apple’s valuation metrics have improved so dramatically in recent months. The discussion goes over Apple getting close to a $3 trillion market cap for the second time.
Let's jump into today's update.
AAPL Valuation Metrics
The AAPL roller coaster continues.
When we last talked about AAPL valuation at the beginning of the year, shares were on a down trend (-28% from all-time highs put in January 2022). Since that update was published, AAPL shares are up a whopping 45%. These are large, although not entirely unusual, moves for such a mega cap stock.
For today’s valuation exercise, it's prudent to run with a forward EPS estimate (earnings for the next 12 months) of approximately $6.00. With Apple shares trading at $189, the company’s forward price-to-earnings ratio (current stock price / forward EPS) is 32x. This is up significantly from the beginning of 2023 when shares were trading at a 20x forward multiple. It’s not the easiest exercise to compare the current forward multiple to historical averages given that we are relying on forward estimates and not reported figures. With that said, a 32x forward multiple would be close to all-time highs for Apple in the modern era. Shares had gotten close to the level in the summer of 2020 as shares made a major move higher prior to significant EPS growth which subsequently brought forward multiples down.
To put the 32x forward multiple in context, we compare Apple to various sectors and the overall market using the S&P 500 as a proxy.
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