Since [Apple] rolled out the iPhone in 2007, its P/E has shrunk, notes Horace Dediu, a former telecom analyst at Nokia and founder of Asymco, a data-analysis firm in Helsinki. In 2007, Apple’s P/E based on the next 12 months of earnings was about 30; now it is about 12.8, compared with the S&P 500’s average of 12.5.
During that same period, Apple’s stock price has soared sevenfold—but its profits have increased by 1,200%.
One reason why Apple’s P/E is so reasonable, experts say, is that the technology sector is especially fickle, and investors are unsure of future profits. “This is a technology company in a world where technology changes quickly,” says John Goltermann, a portfolio manager at Obermeyer Asset Management in Aspen, Colo. “Now, it’s the incumbent, but that’s not necessarily going to be the case forever.”
Disclosure: I am long AAPL.