Apple (NAS: AAPL) shares may cost more than they did a week ago, but that doesn't make the stock more expensive.

Confused? Stick with me. I promise that this will make sense soon.

Shares of the world's most valuable company climbed 5.2% last week, reversing a lot of the damage done during the two prior weeks of stinging declines. However, Apple's earnings multiples -- both trailing and forward-looking -- have actually improved over the past week.


Let's start with Tuesday night's quarterly report. Apple's fiscal-second-quarter profit of $12.30 a share made headlines by blowing past the $10.04 a share that Wall Street was expecting. More importantly for our purposes, it replaced the $6.40 a share that Apple earned during the same fiscal period a year earlier.

In a split second, Apple's trailing earnings -- the sum of its profitability over its past four quarters -- soared 17% from $35.11 to $41.01. What happens to a trailing P/E ratio when earnings growth outpaces a stock's capital appreciation? It gets cheaper.

At a price of $603, Apple closed at a trailing earnings multiple of 14.7 on Friday. A week earlier, Apple closed with a higher P/E of 16.3 even though the stock was at $572.98.

Neat?

It gets neater.

Future shock
As analysts realize that they have vastly underestimated Apple's earnings potential -- something that has happened every quarter for years outside of a single report six months ago -- they also begin to tweak their outlooks higher.

Obviously analysts have to do this for fiscal 2012. They missed on the bottom line, on average, by more than $2 a share! However, in tweaking this fiscal year's model, they can't just leave fiscal 2013 and beyond the same. Why should a company that's growing faster than they expected suddenly be growing slower than they were originally forecasting for the following year?

Over the past week, the consensus estimates for Apple's earnings in fiscal 2012 and fiscal 2013 have rise 5.6% and 6%, respectively.

See how the forward estimates climbed marginally higher than the stock's 5.2% ascent? Yes, that's Apple getting cheaper.

Apple now trades at 12.9 times this fiscal year's per-share target of $46.87 and 11.2 times next fiscal year's target of $53.93 a share.

The moral of the story is that Apple did get cheaper last week. Feel free to point that out to the person who thinks that Apple's stock ran away from them last week. The only thing that ran faster than the stock last week -- thankfully -- is the stock's profitability.

Apple jacks
The next trillion dollar revolution will be in mobile, but the best investing play isn't necessarily Apple. If you want to cash in on the upcoming trend, a new report will get you up to speed. Yes, it's as free as this article, but it won't last forever so check it out now.

At the time this article was published Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.The Motley Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of Apple. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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