Is Now the Time to Buy Apple?

LONDON -- I'm always searching for shares that can help ordinary investors like you make money from the stock market.

So right now I am trawling through the market and giving my verdict on as many large-cap shares as I can. Simply put, I'm hoping to pinpoint the very best buying opportunities for today's uncertain times.

Today I am looking at Apple  to determine whether you should consider buying the shares at $500.


I am assessing each company on several ratios:

Price/earnings: Does the share look like a good value when compared against its competitors?

Price/earnings to growth: Does the share look like a good value factoring in predicted growth?

Yield: Does the share provide a solid income for investors?

Dividend cover: Is the dividend sustainable?

So let's look at the numbers:

Price

3-Year EPS Growth

Projected P/E

PEG

Yield

3-Year Dividend Growth

Dividend Cover

$500

191%

10

0.9

2.1%

N/A

17

The consensus analyst estimate for this year's earnings per share is $50 (11% growth) and dividend per share is $10.60 (290% growth). N/A = not applicable; Apple started paying a dividend in 2012.

Trading on a projected P/E of 10, Apple appears significantly cheaper than its peers in the computer hardware sector, which are currently trading on an average P/E of around 20.

In addition, Apple's relatively low P/E and double-digit growth rate give a PEG ratio of around 0.9, which implies the share price looks cheap for the near-term earnings growth the company is expected to produce.

Apple offers a 2.1% yield, which is forecast to rise quickly next year. However, Apple started paying a dividend only last year, so it is not possible for me to calculate my usual three-year dividend growth rate.

Lastly, Apple's dividend is currently covered 17 times, leaving plenty of room for further dividend growth.

Is now the time to buy Apple?
Apple has revolutionized the tablet, personal music, laptop, and PC markets over the last few years, but now the company is being shunned by investors over worries about falling demand for its products.

However, I believe these worries are overdone. You see, the anxiety originates from Apple's suppliers, which have reported lower-than-expected orders for the screens used in Apple's iPad. This has led many analysts to conclude that demand for Apple's products must be falling.

That said, I believe there are many other explanations for this reduction in orders. In particular, it is well known that Apple's newest tablet, the iPad Mini, is selling well and still enjoys a week-long waiting list. As a result of this high demand, there has been lower demand for the full-size iPad -- resulting in lower screen orders.

These worries aside, Apple still has a large profit margin on all of its products, a huge cash balance of more than $121 billion, and a 53% share of the global tablet market.

In addition, Apple recently announced that it was going to start offering 12- and 24-month finance plans on its products in China, to boost demand in its largest market.

In conclusion, despite worries about falling demand for Apple's products, the company still has a market-leading position and a very strong business model. So overall, I believe now looks to be a good time to buy Apple at $500.

More FTSE opportunities
As well as Apple, I am also positive on the large-cap shares highlighted in "8 Dividend Plays Held By Britain's Super Investor." This exclusive report reveals the favorite income stocks owned by Neil Woodford -- the British investing legend whose portfolios have thrashed the U.K.'s FTSE index by 200% during the 15 years to October 2012.

The report, which explains the full investing logic behind Woodford's market-trouncing strategy and his preferred blue chips, is free to all private investors. Just click here for your copy. But do hurry, as the report is available for a limited time only.

In the meantime, please stay tuned for my next verdict!

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The article Is Now the Time to Buy Apple? originally appeared on Fool.com.

Rupert Hargreaves has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of 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.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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