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Tim Cook delivers astounding profits – but he still can’t catapult Apple’s share price

CEO has more than doubled the company’s earnings, yet the product differentiation between Apple and the likes of Google and Microsoft are narrowing

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Apple CEO Tim Cook speaks about the company's computers during an Apple event in San Francisco, California March 9, 2015. REUTERS/Robert Galbraith (UNITED STATES - Tags: SCIENCE TECHNOLOGY BUSINESS)

Last Tuesday, Apple announced its results for the fiscal quarter to December 2016. As the world’s largest firm by market valuation, it has not disappointed the public in terms of its sales volume.

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After three consecutive quarters of overall year-on-year decline, Apple’s overall revenues rebounded during the last big holiday season, and shares rose more than 3 per cent, now only about 6 per cent off the record high of February 2015, when the firm was valued at $775 billion.

Despite its stellar performance, however, Apple still has no shortage of critics, whose ranks have seemed only to grow since Tim Cook has taken the reins. This may also explain why Apple is glaringly undervalued compared to other tech giants.

Apple’s ratio of price to earnings per share (P/E), which shows what the market is willing to pay for a stock based on its current earnings, sits at around 15. By the same measure, Microsoft and Google are hovering at about 30, Facebook at 50, and Amazon, the most extreme outlier of all, is close to 200.

To put it differently, investors are willing to bet thirteen times more on Amazon than on Apple for every dollar earned by either company. How could that be possible?

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Apple and its CEO Tim Cook still bring in the billions, but he’s going to have to learn some new tricks to stave off growing competition from its main rivals hi-tech Microsoft, Google, Facebook, and Amazon, all of whose ratio of price to earnings per share are performing many times better than Apple’s. Photo: AFP
Apple and its CEO Tim Cook still bring in the billions, but he’s going to have to learn some new tricks to stave off growing competition from its main rivals hi-tech Microsoft, Google, Facebook, and Amazon, all of whose ratio of price to earnings per share are performing many times better than Apple’s. Photo: AFP
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