Apple Marvel: Part 3. Causes and consequences.

I have written two posts with my thoughts on the future of Apple's stocks prices so far. The first one was about the possible problems connected with market perception that may restrain future growth of the price. In the second post, I made an attempt to review Apple's business to find out whether the further expansion is possible. Now, let's take a look on Apple's multipliers to complete the picture.

So, the numbers for Apple are:

Capitalization	$564.3 billion
Annual Profit	$33.0 billion
Annual Profit/Share	$35.37
Price to Earnings ratio	17.1x
Book Value	$90.1 billion
Book Value/Share	$96.59
Price to Book ratio	6.3x

A lot of other financial parameters can be brought, but there is no point in it.  Even these numbers are necessary just to provide the ability to compare Apple with the other companies in the field.

First of all, let's talk about Price to Earnings ratio. In different industries different values are considered as normal, but for companies in the internet technology sector, it is not uncommon to have this multiplier at the rate of 20 to 60-100 for smaller companies, and from 10 to 30 for the largest ones. For example, today Google has 18.8x P/E,  Microsoft - 11.0x, IBM - 14.8x, HP - 6.0x, Intel - 10.8x, and Amazon - a ridiculous 135.9x. So, the current value of Apple's P/E seems absolutely normal. Of course, if the stock price continue to grow, and the earnings stabilize, the value will rise. But to reach level of 30x, capitalization must exceed $1 billion, and taking into account the permanent growth of earnings from year to year, capitalization estimation should be even higher.

While P/E can be viewed as the main multiplier to evaluate whether the price paid for stocks is fair, of course there are other aspects, such as Price to Book ratio, the amount of total liabilities and its structure, the amount of dividend payments and many others. But the trick is that situation for Apple is absolutely normal in every aspect - it is by no means a healthy and solid company. Again, for example, Price to Book ratio for Google is 3.3x, 11.1x for Amazon, 4.0x for Microsoft and 11.6x for IBM, so all these companies can be compared from this point.

It seems pointless to continue trying to find any factors that can stop Apple's stocks price from further rise. While there are a lot of logical causes to doubt in the prospects of growth, from the point of finance it is definitely possible.

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That was the last part of this story. It seems that the growth is likely to continue, but I still think that one should be very careful investing large amounts of money in Apple's stocks, especially through various funds, as risks are relatively high.