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As stock plunges, Apple becomes relative bargain

January 24, 2013|By Andrew Tangel
  • Apple shares plunge 12% after disappointing earnings.
Apple shares plunge 12% after disappointing earnings. (Andy Wong / Associated Press )

As Apple's luster dims on Wall Street, the tech giant's stock is becoming cheaper and cheaper.

By at least one measure, Apple's stock is becoming a bargain. Its price-to-earnings ratio, a shorthand measure of value for stocks, has fallen well below the average of the broad Standard & Poor's 500 index.

“The P/E is extremely low,” said Howard Silverblatt, senior index analyst for S&P Dow Jones Indices.

As Apple's stock falls 10%, to $461.46, in early trading following Wednesday's disappointing earnings report, its P/E ratio -- based on the previous 12 months of earnings -- is down to 10.5.

That indicates a steep discount compared to the average P/E of the S&P 500 of 15.1, according to Silverblatt, who spoke with The Times before financial markets opened Thursday. (Before the market opened, Apple's P/E stood at 11.7.)

Apple's quarterly earnings report Wednesday would have been impressive for any other company, but expectations for the maker of popular smartphones, tablets and computers have soared.

“If this was any other company, we'd be breaking out champagne,” Silverblatt said. 

Disappointed with its perceived prospects for continued growth, investors have been hammering Apple's stock since it hovered around $700 a share in September.

Since then, Apple's market capitalization -- how much the company is worth based on its stock price -- has lost the rough equivalent to General Electric's market cap of about $230 billion, Silverblatt noted.

Apple remains the world's largest public company, but its market cap -- $432 billion in early trading Thursday -- is nearing that of Exxon Mobil Corp.

Exxon's market cap: $418 billion.

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