Educate Yourself About The Expectations Built Into Apollo Group, Inc. (NASDAQ:APOL)

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Yesterday on ValueExpectations.com we released a list of the cheapest stocks in the S&P 500 based on AFG’s valuation criteria. One of the companies provided in the list of “Cheapest stocks in the S&P500” yesterday was Apollo Group, Inc. (NASDAQ:APOL) for having an extremely attractive valuation. Apollo Group has a current AFG Value Score of 99, meaning the company ranks in the top 99th percentile of companies in the AFG universe in valuation attractiveness.

Beyond looking for companies with attractive valuations, it is also important to understand what you are paying for in terms of expectations that are already “priced-in” to the stock for revenue growth. Using AFG’s ValueExpectations interface investor’s can easily identify the embedded expectations a firm needs to deliver to be fairly valued in the market compared to what they have historically been able to deliver.

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In the chart below you will see a snapshot of the ValueExpectations interface for Apollo Group, Inc. to give you an idea of the expectations for revenue growth currently embedded in Apollo’s stock price. The “priced-in” sales growth is what the company must deliver in revenue growth in order to justify its current price assuming the company can maintain its 5 year median asset turn level of 1.73, and last quarter’s EBITDA of 25%. Under these assumptions Apollo Group needs to grow revenue at -12% in order to justify its current stock price of $48. These expectations look to be very low relative to their 5 year historical median sales growth of 15%, which the company has consistently been able to deliver.

Not only does Apollo Group, Inc. look inexpensive, but the expectations for this company seem very realistic to meet or exceed.

The Applied Finance Group's Value Expectations (VE) interface is useful in understanding the imbedded sales growth a company needs to achieve over the next 5 years to justify its current stock price. Measuring the spread between a company’s imbedded sales growth expectation (Implied Sales Growth) and what it has historically delivered (5 year historical median) provides a basis to determine which stocks have relatively low expectations and thus are more likely to outperform. Deciding whether or not a company is a buy or sell takes into account many variables, discovering the embedded expectations is one of the important steps.VE is also designed for portfolio managers and analysts to build out their own assumptions to determine a company’s intrinsic value and to make important investment decisions. If you are a professional money manager and would like to walk through an analysis of one of your current holdings, please contact sales@afgltd.com.

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