Originally Posted by Marvin
If someone has 90% margins but net income of $100m, they aren't going to be valued more highly than Apple with ~20-25% net margins. It comes down to the amount of profit. Apple and Exxon are pretty even when it comes to profitability. Exxon's lower margins don't matter, it's how much the margins change. Both company's margins are staying pretty steady. I certainly don't see that Apple should be valued 30% higher than Exxon when their earnings don't reflect that.
Okay, you're starting to repeat yourself. When that happens, let's just assume we disagree and leave it at that, shall we?
The fact is, there is so much going on besides Net income and Gross Margins, that you can't make a conclusion about valuations. We're talking future cash flows, so we want to know about growth. While Apple and Exxon are pretty close when it comes to profits, Apple has been growing its profits dramatically, while Exxon has been mostly steady with the occasional bump in the road due to oil shocks, etc. Apple's valuation is higher even though the two NI are about the same, because the market presumes Apple's future profit growth will be better, even if it has slowed.
You keep saying that Apple's "earnings don't reflect that", which again is looking at the past earnings, but haven't we agreed that valuations are based upon future expectations? Seriously, what's your point, since you can't seem to stay consistent.
"If a small investor invested now, say $20k, they'd stand to gain $1705 minus fees etc if it reached the same peak as before. It's hardly a hot growth stock."
Who is saying Apple is a "hot growth stock"? Is this another straw man argument? I never said anything of the sort. In fact, given Apple's recent actions, it's more likely characterized as a value stock with growth potential. Why does your example presume that $700 is the top?
"The scam is overhyping potential gains in order to push investors into buying at a higher price:"
And again, why is this in response to me? Where did I hype anything? Everyone knows that theStreet is Jim Cramer's scam site. Why listen to anything written there? I've never linked to it, or quoted it.
"Some investors were getting too emotional, irresponsibly egged on by Wall Street analysts such as Brian White, who had a cutesy $1,111 price target, and Gene Munster, who couldn't stop talking out of his rear with empty Apple TV predictions."
And, again, what does this have to do with me and my posts?
Good god man, I'm not going to calculate every fundamental metric for you, just go to Seekingalpha and read any number of posts about Apple. There's lots of fundamental and technical analysis. No need ro reinvent the wheel. Asking me that is starting to indicate you are just trying to irritate.
"I should have clarified that. I was of course suggesting the P/E was too high and you were saying it was too low"
Nonsense. Nowhere in that original comment, did I say it was "too low". I said, "Are you saying that the Price to Earnings is too high? Have you looked at any other companies lately?" Why do you just make up stuff?
"Basically, I'm saying that it's not significant if the P/E ratio is seen as too low because right now, Apple is a big company with little potential earnings growth."
I'm wondering if you understand the financial markets at all. IF, what you say is true that Apple's future earnings growth is slow, then the markets typically dictate that that company has a low PE ratio. It's NOT irrelevant. It's totally explainable, you just didn't do it. Why do utilities get low PE ratios? Because they have slow growth rates.
"Apple has dominated the premium industry so there's little room to grow further and this is not a bad thing."
Yes, but others may disagree and believe that Apple can extend its offerings, like they did with the iPod, from high-end products to the low-end. When Apple had no netbook offering, aka cheap laptop, Apple extended their line to include iPads, essentially lowering the price of entry for a computing product to $500, and with the iPad mini even lower.
"There's a conflict here between Apple's core values and those of investors."
No, you are ascribing motivations to nameless investors. A total straw man argument.
"All I'm suggesting is that people don't get too carried away with the OMG stock split"
And, what does any of that have to do with my posts? If you want to write an opinion piece, do it in your own thread, and don't QUOTE my post, unless you are responding to me. Clearly, you aren't since none of this has anything to do with my original comment.