UBS Securities’s equity strategy team, including Jonathan Golub, this morning offer some context on Apple’s size and impact on the landscape.
More specifically, each of these “High Flyers” delivered an annualized relative return greater than 50%, with an average of over 100%. This compares to just 45% for Apple. In addition, P/E expansion drove the returns for the vast majority of “High Flyers”, which has not been the case for Apple. More specifically, Apple is trading in-line with the market, whereas the average “High Flyer” traded at nearly a four times premium. The stock looks inexpensive on a PEG basis as well, trading at less than half of its projected growth rate.
Golub & Co. also conclude that Apple’s sales represent “true innovation” and therefore the company deserves a “premium” multiple on its stock, which the firm expects will happen over time:
We believe that companies that deliver above average growth rates despite economic conditions warrant a premium multiple to their peers and the broad market. This should be especially true in the current environment given the macro headwinds of the past five years. While Apple has met this test with flying colors, it carries a multiple roughly in-line with the S&P 500 — 12.8x versus 12.9x. In our view, the company’s ‘true growth’ characteristics should increasingly result in a premium valuation. While Apple trades at a premium to most competitors its multiple seems hardly unreasonable.
Apple shares this morning are up $16.43, or 3%, at $602.