Here for this analysis we select the company of choice as APPLE.
The current price of APPLE stock is 178.54 with a trailing P/E of 14.73. The beta of the stock is 0.99. It has robust profit margin of 22.72% and an attractive return on equity of 25.98%.
If we assume that CAPM is valid, then Rf = 2.64% and Rm-Rf = 4.49%
Then with beta = 0.99, the required return on equity is: 2.64% + 0.99*4.49% = 7.09%
Since the achieved return on equity is much higher, it is worth investing in the stock at reasonably attractive valuations and also with robust profit margins.
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