Apple has been performing amazingly well for years. They keep producing blockbuster hits over and over. Not only are these hits enormously popular they are enormously profitable.

The only real objections to Apple’s stock I can see are: the overall market value is so huge it just has to collapse (over $400 billion – the largest in the world) or it has to be time for a huge reversal of fortunes.

The problem with the view that it will fall is that the stock is very cheap by any rational measure. You are not paying much for all the earnings. Even if Apple does not continue the trend of the last 5 years, if it just stopped growing altogether, it is still cheap (if it does continue that trend it will break $1 trillion by 2014 – but I don’t think it will). The biggest risk is the profit margin shrinks drastically. That is possible. It is even somewhat likely to shrink a fair amount. But there isn’t much reason to think revenues will not grow. And to me, the current price makes sense only if revenues fall and profit margins fall. It takes the worst case scenario to make this stock seem overpriced.

The data on the last quarter (and for 2011 overall) are impossible (except they actually happened).

• record quarterly revenue of $46.33 billion ($26.74 billion in 2010)
• record quarterly net profit of $13.06 billion ($6 billion in 2010)
• Gross margin was 44.7 percent compared to 38.5 percent in the year-ago quarter
• $17.5 billion in cash flow from operations during the quarter (and $38 billion in the last year)
• $100 billion in cash now ($97.6 billion to be exact but since the data was gathered they probably passed $100 billion anyway). That is more than the market cap of all but 52 companies in the world.

You can’t grow quarterly sales from $26.7 billion to $46.3 billion. $26 million to $46 million, fine that is possible, billions however – not possible. Except Apple did. You can’t grow a $6 billion quarterly profit to $13 billion in 1 year. Except Apple did. You can’t generate a cash flow of $17.5 billion in a quarter. Except Apple did. You can’t have a stockpile of $100 billion in cash. Except Apple does. These figures would not have been seen as unlikely just 3 years ago. They were impossible. But Apple achieved them.

These figures are not short term blips. They are the latest in a long stream of amazingly results.

Related: How Apple Can Grow from $200 Billion to $300 Billion In Market Cap – Apple Tops Google (August 2008)

Apple has numerous, incredibly strong businesses. Each could be the linchpin of an extremely valuable company.

• iPhone initial sales and reoccurring income (over 50% of Apple’s revenue)
• app sales (for iPhones, iPads and Macs)
• iPads
• iTunes
• Macs
• Their retail store business – selling all their products

Potentially huge business: Apple TV and ebook sales. It is hard to see how they could have serious stumbles in numerous of these extremely profitable businesses all at the same time.

Some more interesting figures:

• international sales accounted for 58% of sales
• 37 million iPhones (128% growth)
• 15.4 million iPads (111% growth)
• 5.2 million Macs (26% growth) – this used to be their whole business, now you forget it even exists. The MacAir is excellent, by the way, that is what I am using to write this post.
• 15.4 million iPods (21% decline)
• Apple paid $700 million to developers (as part of the app business) last year, and has paid out over $4 billion in total.
• Apple’s profit for the quarter ($13 billion) exceeded Google’s revenue ($10 billion)

I do strongly believe Apple should pay a sizable regular dividend (at least 1.5%). But I don’t know if the odds are great that they will. One risk is they blow the money in foolish ways. When you $100 billion and generate over $3 billion more each month it is hard to appreciate that risking a few billion here and a few billion there really matters.

For each business there is risk and certainly possibilities of slower growth, decline and profit margin contraction. The stock is priced for quite a bit of earnings decline. And has been for awhile. I understand the reluctance to buy a company that has a market cap over $400 billion. But when you look at the finances and contemplate the future it is hard to see how the stock is not cheap. There are risks. There are risks with every stock and risks to the future profitability of every company.

Having so many extremely strong, extremely profitable business puts Apple in a great position. It is hard to see how they can come up with another business line that can make a difference to the profits of a $400 billion company. But the stock price isn’t expecting that. It isn’t expecting growth in revenue. It isn’t expecting growth in profits. From where I sit the potential for Apple from the current price (PE of 13) is much greater than the risk. And even with a 8% increase today is cheaper than yesterday (the news is so impossibly great that 8% doesn’t capture the value of that news).

I own Apple stock, but not enough. My sleepwell portfolio includes Apple stock. I was smart enough to finally buy it after waiting for years thinking the price wasn’t good enough.

Related: Intel Reports Their Best Quarter Ever (July 2010) – Google up 13% on Great Earnings Announcement – Amazon Soars on Good Earnings and Projected Sales – Leadership quotes from Steve Jobs

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