High Share Prices Oh My!
A repost of one of my replies on Forbes website:
Perhaps if they split 10 for 1 then $100 would not seem so difficult for analysts to get their arms around. It is unfortunate apple does not understand this.
At $100/share post 10 for 1 split it trades at a still cheap multiple to its growth rate of just 20 times 2012 earnings of $50/share. Normal analysis would offer a multiple equal to growth. For superior brands and companies even a higher multiple then growth. However apple amazing sports a multiple far south of its growth rate. Trading now at just 8 times 2012 projected earnings ex-cash it is half the overall market multiple. More amazing is that it grew top line over 50% and profits 118% last quarter.
If they merely matched their profit growth multiple of say 100 the stock would be $5,000 per share.
I feel much of this is attributed to people’s anchor to absolute share prices. High share prices tend to be discounted to sub growth multiples. It is seen with Priceline, Berkshire Hathaway, Google and most pronounced with Apple. There was a reason the last 100 years co’s would split their stock when they hit triple digits. Apple needs to not wear this as a badge of honor because it is a badge of shame if you want a fair multiple on your stock price