Comparing the 21st Century's 5 Computer Kings
Christopher is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
In the age of technology, almost everyone has a computer. These companies each have their own aspects and stories that attract investors. Below are five stocks that are worth further consideration.
Apple, Inc. (NASDAQ: AAPL) - Apple is one of the world's most innovative companies. Some people love Apple, while others loathe it. The stock itself has seen returns against the market for some time. Currently Apple is running near its 52 week high just shy of $430 per share. The stock also has a beta of 0.82 making it less volatile than the market, although it does not offer a dividend to investors. The current earnings per share of $27.68 give the stock a price to earnings ratio of 15.5. This is only slightly higher than the industry ratio of 15, but is well below the ratio of the S&P 500 at 25.3.
Currently, Apple's biggest competitor is Google Inc. (GOOG) as both companies compete with one another with smartphones and tablets. Comparing the two in earnings, Apple has the higher net income of $25.92 billion compared to Google's $9.58 billion. Apple's price to earnings ratio is also more attractive as Google has the higher ratio at 21.8.
A potential growth opportunity for Apple is in digital textbooks. The company is currently trying to sell the books to not only gain sales in the ebooks, but also with iPads. If this works out for the company, then it could lead to a noticeable increase in earnings.
Microsoft Corp. (NASDAQ: MSFT) - One of the most recognized companies in the world, Microsoft is next on the list. Also like Apple, Microsoft is also near a 52 week high just below $30 per share. The beta of the stock is 0.98, making it just as volatile as the market. The dividend yield on Microsoft is currently 2.80%, which is $0.80 annually. The earnings per share of Microsoft is $2.74, which gives the stock a price to earnings ratio of 10.3. This is more than half the industry ratio of 21.9, giving the appearance that the stock is undervalued.
When looking at the price to book value, Microsoft is at 4, which is right in line with the industry ratio of 4.28. The net income of Microsoft is $23.48, which is comparable to the net income of Apple. One area to note for Microsoft is the concern of the fall in sales of the PC market. Current estimates are that it fell between 2 to 4%. This is almost primarily due to the collapse in the market for netbooks. However, based on Microsoft's current numbers, it still looks to be an attractive buy for investors.
Dell, Inc. (NASDAQ: DELL) - At one point, Dell was probably the most popular computer company in the world. However, the company has since fallen behind when it comes to markets now dominated by Apple and Google. The stock's current price is near its 52 week high just below $20.00 per share. Dell's beta is one of the higher on the list at 1.26, making it more volatile than the market. The stock currently does not offer a dividend to investors.
The earnings per share for Dell is $1.95, giving the stock a price to earnings ratio of 8.5. This is almost half of the industry average at 15. The price to book value at 3.4 is also below the industry average 5.08. Current estimates of Dell's stock are that the price will rise, though not by much. The mean target price is $17.65 which, at current prices, is about a 6% increase.
Hewlett-Packard Co. (NYSE: HPQ) - With a beta of 1.36, Hewlett-Packard is the most volatile stock on the list. The stock currently offers a dividend to investors of $0.48, or a yield 1.80%. HP's earnings per share of $3.32 give the company a price to earnings ratio of 8.3, which is less than the industry ratio of 13.5. The price to book value is 1.39, which is substantially lower than the industry ratio of 7.87. This ratio is one that many value investors look for when screening a stock that is undervalued. Although it won't mean definitively that HP is undervalued, it is a good starting point for an investor looking for a bargain. Comparing Hewlett-Packard and Dell, HP has the higher net income at $7.07 billion compared to $3.66 billion.
International Business Machines Corp. (NYSE: IBM) - Big Blue is the final stock on the list, and the least volatile with a beta of only 0.41. The stock is more than half as volatile as the market as a whole. The stock also has the highest cash dividend of $3.00 annually. Although the amount is the highest, the yield is 1.70% based on the stock's current price. As of market close, the stock's price is in the lower $180's per share, which is closer to the 52 week high in the mid $190s. The company's earnings per share of $12.64 give the company a price to earnings ratio of 14.3. This is slightly higher than the industry ratio of 13.5. Additionally, the price to book value of 9.57 is also higher than the industry which is at 7.87.
The net income of IBM is $15.62 billion; more than twice of HP's. However, it currently trails Microsoft at $23.48 billion. A positive note for IBM is that the fourth quarter earnings of $4.71 per share surpass estimates by 2%. Analysts also see a positive 2012 for the company as well with a mean target price of $196.29. At the current price, this would be an increase of just under 10%.
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