E = Earnings Are Increasing Quarter-Over-Quarter
Earnings and revenue growth expectations are built into most equity valuation models. Generally, a rise in earnings and revenue growth rates is strongly correlated with a rise in the stock price. What do the last four quarterly earnings and revenue growth figures for Apple look like? The last four quarterly earnings growth (Y-O-Y) rates have been: -0.43, 22.66, 19.64, and 92.19 percent while the last four revenue growth (Y-O-Y) rates have all been: 17.65, 27.22, 22.58, and 58.86 percent. Apple’s earnings and revenue growth rates have, for the most part, been strong.
More importantly, how did the markets like these numbers? The last four quarterly earnings announcement reactions help gauge investor sentiment on Apple’s stock. The last four quarters have seen next trading session returns of -12.35, -0.9, -4.31, and 8.87 percent. Clearly, the markets have been expecting stronger growth rates from Apple.
E = Poor Relative Performance Versus Peers and Sector
Sure Apple products are a hot item but how has the stock done relative to its peers and sector? Year-to-date, the stock is returning -17.1 percent while its competitors, Hewlett-Packard (NYSE:HPQ), Google (NASDAQ:GOOG), Research in Motion (NASDAQ:BBRY), and the sector are returning 52.26, 11.97, 30.18, and 1.71 percent respectively. Apple stock has not been as hot as its products year-to-date.
Apple is an established brand that sees very strong worldwide demand for its products. Can the stock recover from its recent slump? Apple stock has been a huge winner over the years but has recently seen a strong decline. Earnings and revenue growth rates have been decent but investors have had higher expectations priced-in. Relative to its peers and sector, the stock has been a weak performer year-to-date. WAIT AND SEE what Apple delivers in this coming quarter.
Here’ how Apple has traded in 2013:
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