Last year, October 2011, one of my friends asks me about my opinion for Apple. Typically, Apple is a growth stock and recently pays out dividend and its earnings have been growing for the past few years.
Using PEG to value Apple at that point of time, the value for Apple Shares is around 0.66 (undervalue)
Therefore, what will be the value for Apple shares now which is trading at a price of $633.68 per share?
Assume the next 5 years earnings growth rate which is around 20.80% forecast by the analyst & current 18 times earnings, using PEG to value it, the value for Apple shares is around 0.87 (undervalue)
Personal basis, I will only buy Apple for capital gain instead as a long term holding for my portfolio to receive dividends.
After sharing my view on Apple outlook including the valuation, my friend bought the shares around the price of $370 – $380 highlighted on the chart shown in this post. At its current trading price of $633.68, the capital gain is at least 70%.
The common questions, most people will tend to ask, including my friend who bought the shares, should they continue to hold it or sell it off.
My reply to them is to hold it but at the same time, sell a portion of the shares to realise some profit. To an extent, I believe Apple shares will continue to rise after launching their IPhone 5.