Apple's Realized P/E Ratio [Chart]

Horace Dediu of Asymco takes a look at the realized P/E Ratio of Apple's stock.

The Price/Earnings ratio measure the 'value' of a company. The price is current share price of the stock and the earnings is the sum of the last 12 months' earnings per share. It attempts to answer the question, "If earnings don't change, how many years will I have to wait before I'm paid back for my share purchase with retained earnings."


Dediu found that Investing in Apple between 2006 to 2010 meant obtaining a payback period of less than 4.5 years, on average. In other words, regardless of what the trailing or forward P/Es getting quoted at the time (trailing is illustrated below), buyers actually paid for only about 4.5 years of earnings. In other words they actually bought Apple for a P/E of about 4.5.

Thus purchasing Apple in that last few years has been a very low risk opportunity with investors getting paid back in less than five years.

You can find a much more detailed explanation of how these numbers were calculated at the link below...

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