Ever since Jobs, the chief executive officer, disclosed that he had a rare form of pancreatic cancer in August 2004, Apple’s stock has been underpriced. That assertion may seem absurd, given that the shares have risen more than 2,000 percent since then and the company’s market value of $325 billion is second only to that of Exxon Mobil Corp. Apple’s share price is now hovering at about $355.
It should be much higher. Since 2004, Apple earnings have gained 134 percent a year on average. In 2009, net income rose 35 percent, during the biggest economic collapse since the Great Depression. And they increased 70 percent last year. Yet Apple’s price-earnings ratio based on expected earnings in fiscal 2012 is only 11, compared with theStandard & Poor’s 500Index’s average of 15. Trading at the S&P 500 multiple, Apple’s stock should be more like $480.
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