Up 18% this year, is Apple stock good value right now?

Some companies need no introduction – and I will tell you Apple (NASDAQ: AAPL ) is one of them. Tech giants are part of everyday life around the world, driving huge profits for these businesses. So far this year, Apple shares have jumped 18%.

But within a year, the share price has fallen by 10%.

Apple has spent more on buying back its own stock in the past decade than any other company. As major shareholder Warren Buffett has pointed out, that means a company’s earnings per share are higher even if profits aren’t rising.

This year’s rally shows that Apple stock still has a lot of fans. Should I join and buy some for my portfolio?

Apple is big business

Like Buffett, when thinking about stocks I can buy for my portfolio, I try to find good businesses at attractive valuations.

From a commercial perspective, I always think Apple is a good business. Last year, the profit was $394 billion. In other words, in just one year, sales equal about $50 to every man, woman and child on the planet. This is an incredible level of sales for a consumer electronics company.

Even better in my opinion, earnings come in at $100bn. That’s a huge number in itself. But it also means that Apple made a net profit of 25% last year. That’s impressive.

Can companies continue to print money in the future? Inexpensive competition is a threat to sales and profits. Recessions in many markets can also reduce sales. Indeed, sales and earnings fell in the last three months of last year.

But the business offers a variety of unique products. The service ecosystem connects users, giving them tremendous pricing power. I also expect the financial arm to drive future earnings growth. Service revenue grew in the last three months of 2022. I see considerable scope for that growth to continue, as more shoppers choose to use digital payment methods such as Apple Pay.

What stocks are bargains?

Clearly, I would love to have Apple stock in my portfolio – if I can buy it at the right price.

On the other side of Buffett’s approach – is the current stock price attractive?

I don’t think so. Apple trades at a price-to-earnings (P/E) ratio of 25. If the latest quarterly earnings trend continues, the prospective P/E ratio is higher. Given the weak economy in many countries, I see further declines in income as a distinct possibility.

The company has grown a lot, but I may not benefit as an investor if I overpay. It has a lot going for it a year ago – but if I have bought it then I will sit in the purchase of paper. Apple shares have been lower in that time. But I also think certain risks have grown, as shown by the recent drop in income.

I don’t think buying into Apple at its current share price offers good enough value to warrant a place in my portfolio. So I will wait and see if this big business will be cheaper than buying it now.