Common Stock (KS): Security Analysis

1739 Words 7 Pages
Security Analysis
Common Stock (KS)
• Earnings Per Share Earnings per share is the portion of a company’s profits distributed to each share of common stock that is outstanding. Earnings per share is calculated by dividing net income by the number of total shares outstanding (Ross 26). Apple Inc.’s 10-K lists earnings per share in two categories, basic a diluted. Basic earnings per share are calculated by dividing available income to common shareholders by the weighted-average number of outstanding common stock during the period. Diluted earnings per share are calculated by dividing available income to common shareholders by the weighted-average number of outstanding common stock during a period of time but it is increased to include
…show more content…
It is calculated by dividing price per share by earnings per share. This ratio measures how much an investor is willing to invest in order to receive one dollar of what the company earns. Typically higher P/E ratios indicate that a company is expecting significant future growth (Ross 65). In 2014 Apple reported a P/E ratio of 17.87, which fell in the middle between its two closet competitors and exceeded estimates. Hewlett-Packard reported a P/E ratio of 7.51 in 2014, which failed to exceed estimates, and Google blew estimates of a 0.70 P/E ratio by reporting a 33.82 P/E ratio in 2014 (“P/E Ratio”). Over the past 12 months, the company’s P/E ratio is 12.5 times higher than earnings. As of September 2015, Apple was trading at a P/E ratio nearing 11.8, in comparison, the average company in the S&P 500 index is trading at a much higher P/E ratio around 18.4. It seems as if Apple Inc. has been underestimated as of late due to Wall Street’s expectation that the company’s growth will slow as the industry they are in matures, but Apple maintains earnings by operating efficiently and stockholders continue to take note of that …show more content…
Market capitalization represents the market view of a stock value and is used in determining stock price. Currently, Apple Inc.’s market capitalization is $657.41 billion, which far exceeds Hewlett-Packard Co.’s market capitalization that totaled $50.48 billion, and also exceeded Google’s parent company’s market capitalization of $497.01 billion. Apple’s market capitalization has been on a steady climb for the last 5 years, meaning shares outstanding have been increasing along with the price of those shares. February 2015 recorded the company’s highest level of market capitalization at $774.69 billion and consistently exceeds benchmarks for the company (“Apple Inc.

Related Documents

Related Topics