Apple Shows No Signs of Slowing

 | Jan 27, 2012 | 11:30 AM EST
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Apple (AAPL) is garnering accolades like Dr. Spock at a Star Trek convention. Its first-quarter results, for the period ending Dec. 31, 2011, led The Wall Street Journal to declare, "Apple just knocked one out of the park." Earnings went from $6.43 a share to $13.87 a share, a meteoric 118% rise, while revenue rocketed up 73% to $46.33 billion from $26.74 billion. As the Journal reported, the company's cash is up to $97.6 billion, more than the market cap of all but 52 publicly traded companies.

Product sales increases were off the charts. Sales for the iPhone were strong enough that Apple became the largest smartphone maker in the world, garnering 23.9% of the smartphone market and displacing the previous frontrunner, Samsung, whose market share was 23.5%. However, for all of 2011, Samsung remained in front, having a 19.9% market share vs. Apple's 19.0%. iPad unit sales rose 111%, while the number of Macintosh computers sold rose 26%. The company's fading iPod sold 21% fewer units than a year earlier.

On the basis of these numbers, Apple's stock rose enough to once again make it, briefly, the world's most valuable company, before it fell back. As I write this, Exxon Mobil (XOM) is ahead by about a billion dollars.

To say Apple is on a roll is like saying Michael Jordan was on a roll whenever he was in a championship series: The statement is true, but it hardly captures the scope of the achievement. And while Apple may not be unstoppable forever, right now it seems unstoppable.

A few weeks ago, I wrote about several companies, including Apple, which received "some interest" from my guru strategies, which are computerized strategies I modeled from the writings of great Wall Street investors. Today, Apple has moved from a "some interest" stock to a "strong interest" one, by the reckoning of the latest analysis from my Martin Zweig strategy.

This strategy looks for stocks with a price-to-earnings ratio of at least 5, but less than 3x the current market P/E, which is 16. Apple's P/E is 12.66, which fits into the strategy's parameters. The strategy wants to see the rate of quarterly sales growth rise. The most recent rise in sales was 73.3%, which was greater than 39% growth that occurred in the first quarter last year.

This strategy requires positive earnings per share and a growth rate in the current quarter's earnings that is greater than the growth rate experienced in the same quarter a year earlier. Apple meets these tests, too. In addition, earnings have increased in each of the past five years -- an important test -- and the company has zero debt, a factor that is also very much to the Zweig strategy's liking.

Any way you slice-and-dice Apple's performance -- financially, marketing-wise, in terms of buzz or excitement -- the company is performing at a remarkable level. The stock price is lofty, but earnings are growing so rapidly that the company's P/E is quite modest. The Zweig strategy indicates that Apple is a buy, and that is hard to argue with at this time.

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