Last week’s earnings report was a beat, and confirms the earnings growth picture. AAPL should trade at valuations that assumes stable and growing earnings again, like the trading environment we had just prior to the 2012 large rise and fall.
One of the charts I that is the most important is my Free Cash Flow chart. For several months AAPL has traded in the range of 10x to 12x free cash flow. See what that means for this coming quarter at the link above.
During 2010-2011 AAPL traded mostly in the range of 11x to 13x FCF, dipping to near 10x at the end of 2011. The late 2012 collapse sent prices under 10x for two whole quarters. We’re now back to a more reasonable 10x-12x range now that earnings has stabilized and begun growing again.
The other important valuation chart is the CPE Valuation Range. My next post will address that.