Citadel Group Ltd (ASX: CGL) announced today that its shareholders have approved the all-scrip offer from private equity group, Pacific Equity Partners, as an alternative to the all-cash $5.70 per share takeover offer. At the time of writing, the Citadel share price is trading flat at $5.67.

About the Citadel takeover

In September, investors scrambled to buy up the Citadel share price after the company announced it had received a takeover approach from Pacific Equity Partners (PEP).

The proposed offer at the time was for an all-cash price of $5.70 per share, a 43% premium on the Citadel share price at that time. The offer valued Citadel’s equity at $448.6 million and enterprise value at $503.1 million. The Citadel share price jumped by 35% on the news that day. 

However, the terms of the bid also gave shareholders the option to take a scrip alternative to enable them to retain an indirect interest in the business. In this alternative proposal, they can choose either all-cash, all-scrip or a combination of the two.

Today’s voting results have validated shareholders’ wish for the alternative scrip proposal.

Management backing

The company’s directors have been supportive of the offer and recommended that shareholders vote in favour of the scheme.

Citadel board chair, Peter Leahy, said this about the takeover offer:

The PEP offer is an attractive transaction which provides an all-cash option for Citadel shareholders. The Citadel board has unanimously concluded that the scheme represents a compelling outcome for our shareholders, customers, suppliers, and staff.

It is worth noting that the cash offer price of $5.70 is a significant discount to where the Citadel share price was trading in November 2018. At that point the company’s shares were trading at over $9. Furthermore, it’s actually lower than the company’s February high of $5.92. 

Next steps

An all-scrip scheme is unusual for a private equity buyout, however under the terms of this scheme, shareholders can elect to take scrip in Pacific Group Topco Limited,  a private holding group set up to own Citadel’s shares. 

The Citadel directors have today reiterated their recommendation that Citadel shareholders approve the offer, in the absence of a superior proposal, and subject to the independent experts continuing to conclude that the scheme is in the best interest of Citadel shareholders.

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• The Nitro (ASX:NTO) share price is down 20% in a month. Time to invest?

Motley Fool contributor Eddy Sunarto has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Gentrack Group Limited (ASX: GTK) share price has slipped slightly in opening trade this morning after the software company released mixed full-year results for the 2020 financial year.

Gentrack builds software for energy utilities, water companies and airports, mainly in Australia and New Zealand. The company’s platform aims to develop, integrate and support billing and customer management solutions. At the time of writing, the Gentrack share price is trading 1.42 lower at $1.39.

What did Gentrack announce?

Gentrack reported growth in a number of metrics, but fell short other areas. For the period ending 30 September, revenue declined 10% to $100.5 million over the prior corresponding period (pcp). The company attributed the revenue slump to the impact of COVID-19 which saw delays in projects, particularly its airport programs.

Annual recurring revenue (ARR) saw an 4.9% uplift, which Gentrack registered $81.3 million over the comparable period. Its utilities business did the heavy lifting, representing $70.9 million of the group portfolio, with its airport division coming in at $10.4 million.

Earnings before interest, tax, depreciation and amortisation (EBITDA) plummeted 51% to $12.1 million.

Statutory net profit after tax came at a loss of $31.7 million. This included a partial write-down of $34.5 million mostly related to its blip and utilities segment due to COVID-19 uncertainly.

Gentrack recorded a cash balance of $16.8 million at the end of September, reflecting an increase of 263% from the year before.

The board advised that due to the net profit after tax loss, it will not pay a final dividend to shareholders.

Management commentary

Commenting on the results, Gentrack CEO Gary Miles said:

The results reflect a tough year for our utilities and airports customers. Pleasingly, the revenue mix and shift in annual recurring revenues is positive.

We see opportunities in our markets and our strong net cash position sets us up to accelerate our technology investment and lead the industry as it transforms to the cloud and clean technologies. This year, we’ve also played a key role in enabling our customers to adapt to COVID, keeping their mission critical systems operational and ready to support customer hardship at this time.

FY21 outlook

Looking ahead to the new FY22 year, Gentrack opted not to provide investors with a guidance. However, it did reveal that it expected EBITDA run rate for FY21 to be well below H2 FY20. This in turn could hit the company’s bottom line with a possible break-even depending on its ongoing product investment strategy.

Management said that it continued to see opportunities in cloud technology and would seek to compete in this space.

Furthermore, the company will deliver an update on progress at its annual general meeting in February.

About the Gentrack share price

The Gentrack share price has been trading lower this year, sitting around 65% below its high of $4.02 last November. However, the Gentrack share price is up 25% since the start of the month.

The company has a market capitalisation of $139 million and a price-to-earnings (P/E) ratio of 12.8.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Straker Translations Ltd (ASX: STG) share price is trading flat on Thursday following the release of its half year results.

At the time of writing the translation platform provider’s shares are fetching $1.59.

How did Straker perform in the first half?

For the six months ended 30 September, Straker delivered a 9% increase in revenue to NZ$14.8 million.

The vast majority (93%) of this revenue is classed as recurring, with its annualised repeat revenue increasing 32% to NZ$28.1 million.

A reduction in the company’s gross margin due to COVID-19 induced pricing pressures and acquisitions, led to its gross margin falling from 54.4% to 51.1%.

Nevertheless, Straker recorded positive adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) of NZ$0.04 million, compared to a NZ$0.24 million loss a year earlier. Management advised that this was driven by acquisition synergies and COVID-19 related cost reductions.

Cash used in operating activities was NZ$0.4 million, down from NZ$1.5 million a year earlier. Management believes this reflects the improved operating performance of the business.

This led to Straker finishing the period with cash on hand of NZ$7.7 million, which management believes provides more than enough capital to fund its operations.

The company’s CEO and Co-Founder, Grant Straker, commented: “We are very pleased with the progress we have made over the last half year. Although the COVID-19 pandemic disrupted momentum and margins in the first quarter, we have over the last few months seen a resumption of growth and this culminated in September with our largest ever sales month.”

“COVID-19 is accelerating the transition of the translation industry to an outsourced and automated model and we are benefitting from this trend. Our technology and service proposition continues to gain recognition around the world, as our recently announced contract with IBM highlights and this interest is filling the sales pipeline. We are seeing particularly strong engagement with global enterprise customers who value our global reach as much as they value the speed, accuracy and service that our platform delivers,” he added.

Outlook.

The company believes its growth can continue in the second half and beyond, particularly given its recent game-changing agreement with IBM.

Mr Straker said: “Straker is well placed to continue to grow for the remainder of the current financial year and beyond. Core repeat revenue is strong. The relationships we have established with new enterprise customers through acquisitions and through the follow up by our sales teams positions us for organic growth.”

 “We continue to expect revenue from the recently announced IBM agreement to positively impact the Q4FY21 financial results and expect it to yield a significant contribution in FY22,” he added.

The chief executive also revealed that the company has acquisitions in its sights and discussions are ongoing.

He explained: “Meanwhile, with COVID-19 accelerating the consolidation of the global translation industry, we have resumed talks with several potential acquisition targets where we can drive immediate margin improvements as we integrate our technology and share support office costs.”

Before concluding: “We are looking ahead with confidence and look forward to providing an update at the end of the third quarter, if not before.”

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Straker Translations. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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After surging to a 52-week high of $3.66 in late October, the share price of ASX mid-cap technology company Nitro Software Ltd (ASX:NTO) has come off the boil more recently. The Nitro share price has slid more than 20% lower this month and is down 2.14% to $2.74 in opening trade today.

It joins a growing list of companies, including the likes of Megaport Ltd (ASX:MP1) and Whispir Ltd (ASX:WSP), whose share prices all stormed to new highs this year, but have struggled to maintain their momentum as COVID-19 restrictions ease across the country.

About the company

Nitro develops a suite of software solutions that allow individuals and businesses to streamline and digitise document workflows. Companies can create, edit, sign and store important documents entirely online, reducing the need for traditional forms of hardcopy file management. Not only does this simplify workflows, but it can massively reduce printing costs for large companies, and even make them more environmentally friendly.

Despite facing stiff competition from US tech giant Adobe Inc, Nitro excelled during 2020. The COVID-19 pandemic disrupted its sales pipeline early on, but Nitro was able to tailor its product offering to meet the unique demands of the “new normal” of remote working. It made the extremely canny decision to make its eSignature solution free throughout 2020 to help support companies as they transitioned to working from home.

Results for the most recent quarter, ending 30 September 2020, were positive across just about all financial metrics. Cash receipts from customers increased by 17% quarter-on-quarter to $11.6 million, and subscription annualised recurring revenues (ARR) was ahead of prospectus forecasts. The company also ended the quarter with a strong balance sheet, comprising $44.4 million in cash and no debt.

Nitro remains bullish on the outlook for the remainder of this calendar year. Full year revenue is expected to be in line with its prospectus forecast at $40.5 million. Subscription ARR is anticipated to be between $26 million and $27 million, well ahead of the $24.4 million forecast in the prospectus.

Is the Nitro share price a buy?

Nitro is a favourite of our analysts here at Motley Fool. They’ve twice recommended it to our Extreme Opportunity subscribers. The first time was back in February, when Nitro shares were trading at around $1.70, and the second time was in early September.

Our analysts like the company’s rapid subscription growth, strong sales pipeline, and the savvy way it launched its new eSignature product. They were also impressed with how well the company adapted to working under COVID-19 restrictions.

If you agree with our Foolish analysts, now might be a good time to pick up shares of Nitro while the price is dipping. Who knows how far it could climb next year!

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Rhys Brock owns shares of MEGAPORT FPO, Nitro Software Limited, and Whispir Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends MEGAPORT FPO and Whispir Ltd. The Motley Fool Australia has recommended MEGAPORT FPO, Nitro Software Limited, and Whispir Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Australian Competition and Consumer Commission (ACCC) has settled a case against Telstra Corporation Ltd (ASX: TLS) for “unconscionable conduct”.

The telco has agreed to the filing of court proceedings to potentially impose penalties totalling $50 million. The Federal Court will now decide what the exact penance will be.

Telstra admitted staff at 5 retail stores signed up 108 Indigenous customers to post-paid mobile phone contracts that they didn’t understand and couldn’t afford.

The sales staff used “unfair selling tactics and took advantage of a substantially stronger bargaining position” during those sign-ups.

“Many of the consumers spoke English as a second or third language, had difficulties understanding Telstra’s written contracts, and many were unemployed and relied on government benefits or pensions as the primary source of their limited income,” stated the ACCC.

“Some lived in remote areas where Telstra provided the only mobile network.”

Vulnerable customers devastated with debt

The average debt each customer racked up was more than $7,400. Many faced financial hardship with Telstra even referring some to debt collectors.

In many of the cases, the ACCC stated sales staff manipulated credit checks to allow those customers to sign contracts they otherwise would be barred from. This included inputting that the customer was employed when they weren’t.

Telstra chief Andrew Penn apologised for the conduct.

“While it was a small number of licensee stores that did not do the right thing, the impact on these vulnerable customers has been significant and this is not ok.”

“Early this year I visited the NT, SA and WA to meet with some of the affected communities and customers to apologise and hear first-hand of the impact of these sales practices on them.”

The dodgy sales tactics were admitted at Telstra-licenced stores in Alice Springs (NT), Casuarina (NT), Palmerston (NT), Arndale (SA) and Broome (WA) between January 2016 and August 2018.

“Even though Telstra became increasingly aware of elements of the improper practices by sales staff at Telstra licensed stores over time, it failed to act quickly enough to stop it, and these practices continued and caused further, serious and avoidable financial hardship to Indigenous consumers,” said ACCC chair Rod Sims.

“This case exposes extremely serious conduct which exploited social, language, literacy and cultural vulnerabilities of these Indigenous consumers.”

‘Extreme anxiety’ about going to jail

Sims said the personal toll on the affected customers was immense.

“For example, one consumer had a debt of over $19,000. Another experienced extreme anxiety worrying they would go to jail if they didn’t pay, and yet another used money withdrawn from their superannuation towards paying their Telstra debt,” Sims said.

“Telstra is Australia’s largest telecommunications provider. It has clearly failed to meet community expectations for appropriate business behaviour.”

The telco has since waived the debts, fully refunded payments and instituted mechanisms to reduce the chance that such sales tactics could be used.

The company has also agreed to expand its Indigenous telephone helpline and upgrade its digital literacy program for customers in remote areas.

“This case is a reminder to all businesses to ensure that they comply with Australian Consumer Law in their dealings with all consumers, especially vulnerable consumers in regional or remote communities,” said Sims.

Penn said Telstra wanted to be “a responsible business” and do right by the community but it had failed this time.

“We need to acknowledge when that happens, and today is unfortunately one of those times,” he said. 

“Disappointingly these customers did not receive the standard of care or service they should expect from us, and we did not then act quickly enough to fix the issues once they became known.”

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Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Shares in soft tissue regeneration company, Aroa Biosurgery Ltd (ASX: ARX), are falling lower this morning after the company reported a 10% decline in revenue for the first half of FY21. At the time of writing, the Aroa Biosurgery share price is trading 3.03% lower at $1.28. The company also reported a decline in normalised earnings before interest, tax, depreciation, and ammortisation (EBITDA), reporting a loss of NZ$2.3 million compared to positive earnings of NZ$2.15 million a year earlier.

What else did Aroa Biosurgery report today?

Aroa says that even though its revenues were down by 10% to NZ$9 million, it is still  ahead of the company’s COVID-19 adjusted planning assumptions.

The company ended the half-year in a strong financial position with cash on hand of NZ$38.7 million.

Aroa says it expects to deliver revenue growth in the second half of FY21 to NZ$21 million as restrictions are expected to ease.

A quick look into Aroa Biosurgery

Aroa Biosurgery is a New Zealand-based, soft tissue regeneration company focused on improving the rate and quality of healing in complex wounds and soft tissue reconstruction.

Its products are mainly offered in the United States, and target chronic wounds and soft tissue reconstruction including for hernias, breast reconstructions and trauma, limb salvage, and tumour surgery.

Aroa says its total addressable market for the entire Aroa product portfolio has grown from $1.5 billion to more than $2.5 billion in the US this year. 

In July, the company received US Food and Drug Administration (FDA) clearance for its Symphony product. This product will be used to reduce the time to wound closure, particularly where patients have severely impaired healing. Aroa expects to commercially launch Symphony in 2021. 

How has the Aroa Biosurgery share price performed in 2020?

Aroa Biosurgery first listed on the ASX on 24 July this year after raising $45 million at 75 cents per share, with an indicative market capitalisation of $225 million. Minutes after listing, the Aora share price shot up to $1.52, before retreating to $1.35 at close of trading that day. 

The Aroa share price is currently trading around 26% lower than its all time high reached on 30 July and has a market cap of $387 million. 

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Motley Fool contributor Eddy Sunarto has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Galaxy Resources Limited (ASX: GXY) share price has ended its winning streak and is dropping lower today.

At the time of writing, the lithium miner’s shares are down 3.5% to $1.93.

Why is the Galaxy share price tumbling lower?

This morning the company’s shares returned from a trading halt after successfully completing its fully underwritten institutional placement and entitlement offer.

According to the release, Galaxy raised a total of $124 million from institutional investors at $1.70 per new share. This represents a 15% discount to its last close price of $2.00.

Galaxy received significant demand during the institutional offer bookbuild from high-quality, eligible existing and new institutional investors located in Australia and internationally. It revealed a take-up by eligible existing institutional shareholders of approximately 92%.

It will now push ahead with its fully underwritten retail entitlement offer to raise a further ~$37 million. This will bring the total raised to $161 million.

Upon completion, Galaxy’s balance sheet will be strengthened with pro-forma cash and financial assets to increase from US$102 million (as of 1 November 2020) to US$219 million (before offer costs).

Why is Galaxy raising funds?

Management advised that the proceeds from the offer will be applied to Sal de Vida Stage 1 and fund pre-development activities to progress James Bay to a construction ready status.

Galaxy’s CEO, Simon Hay, commented: “We are delighted by the strong response we have received for the Equity Financing from a broad range of high quality, domestic and international institutions which we believe, underlines the quality of our asset portfolio. Securing these funds is an important milestone for Galaxy as we seek to commit to execute and develop Sal de Vida into a successful, lowest-quartile cost lithium brine operation.”

“The Equity Financing proceeds will also be used to accelerate James Bay to a construction ready status which Galaxy believes is timely given the project’s high-grade nature and location, positioning Galaxy to take advantage of the expected growth in electric vehicle demand in Europe and North America,” he concluded.

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Motley Fool contributor James Mickleboro owns shares of Galaxy Resources Limited. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The WiseTech Global Ltd (ASX: WTC) share price is climbing higher following the release of its annual general meeting presentation.

At the time of writing, the logistics solutions company’s shares are up 2% to $30.73.

What happened at the WiseTech Global AGM?

As with all annual general meetings, the company started by providing investors with a reminder of how it performed in FY 2020.

For the 12 months ended 30 June, WiseTech Global delivered a 23% increase in revenue to $429.4 million. This was driven by a combination of acquisitions and its core CargoWise offering.

The latter continued its strong growth and recorded revenue of $263 million, up 20% on FY 2019. Management advised that this reflects new customer signings and increased usage by existing customers.

On the bottom line, excluding a fair value gain of $111 million, its underlying net profit after tax was flat at $52.6 million. This was due to increased depreciation and amortisation expenses from its increased investment in research and development and the amortisation from acquisition product development.

What is expected in FY 2021?

In August, WiseTech provided full year guidance for revenue of $470 million to $510 million and earnings before interest, tax, depreciation and amortisation (EBITDA) of $155 million to $180 million.

This represents growth in the range of 9% to 19% and 22% to 42%, respectively, year on year.

This morning WiseTech has reaffirmed this guidance. However, it has warned that the ongoing and longer-term impacts of COVID-19 are still not completely predictable.

One thing management is much more certain on is its long term growth prospects beyond COVID-19.

WiseTech’s CEO, Richard White, commented: “Looking ahead, with penetration of automated, truly global logistics solutions still in early stages, WiseTech’s opportunity for growth is vast. We believe CargoWise is the market-leading platform for global logistics execution and is well-positioned to strengthen its position in the global market over the near-term and long-term.”

“… longer term, COVID-19 market disruptions have provided a tailwind for growing our market share as the need for digitalisation across the global logistics execution market accelerates and significantly increases the value and demand for CargoWise,” he added.

More reading

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of WiseTech Global. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Virgin Money UK CDI (ASX: VUK) share price will be on watch this morning after the bank posted a big drop in FY20 profit.

But don’t be too caught up in the profit numbers. The real growth driver for the sector isn’t what you think.

The announcement comes on the day that the S&P/ASX 200 Index (Index:^AXJO) is expected to open softer along with other ASX banks.

The UK lender unveiled a 77% crash in full year underlying net profit to £124 million ($225.5 million). This was largely driven by a huge increase in impairments to £501 million from £153 million in FY19.

Virgin Money share price on edge

But even ignoring impairments, operating profit fell 10% to £625 million due to margin squeeze and base rate cuts.

The banks net interest margin (NIM) fell 10 basis points to 1.56%, while non-interest income declined due to lower activity.

The key drag was a 3% drop in mortgage lending to £58.3 billion as the COVID‐19 lockdown in the UK impinged on the housing market.

How much bad news is priced into ASX banks?

This was offset somewhat by growth in business lending (up 13.6%) and personal lending (up 3.9%). But lending to these two segments only amounted to around £14 billion in total.

However, the weak results won’t surprise anyone. It’s much the same story when ASX banks turned in their earnings report cards.

The National Australia Bank Ltd. (ASX: NAB) share price, Westpac Banking Corp (ASX: WBC) share price and Australia and New Zealand Banking GrpLtd (ASX: ANZ) share price rallied despite the big profit drops.

The key to ASX bank earnings growth isn’t lending

This is because investors believe the worst is over for bank earnings. While earnings growth is likely to be missing in action in FY21, there’s an expectation that the large provisioning they put aside for bad debts will be lowered.

This is an important point for investors. Every dollar that’s removed from impairments and provisions flows straight to net profit.

Even if lending growth stagnates, bank earning can soar in FY21 if the banks can release some of the emergency funds they’ve put aside.

We are starting to see signs of this. Commonwealth Bank of Australia (ASX: CBA) made such a move with the blessing of our banking regulator.

In my view, this is what’s driving the re-rating in the banking sector.

Foolish takeaway on the Virgin Money share price

While Virgin Money operates in the UK and is driven by different factors, its huge impairments give it a lot of fat that can be moved back to its bottom line if economic conditions and confidence improve.

This is good news for the Virgin Money share price as management painted a lacklustre outlook for FY21. Net interest margin is likely to be “broadly stable” this financial year, which to me means it could dip more.

But with a number of promising COVID vaccines in the making, the UK economy could see a bounce back next year – just in time for Virgin Money to lower its impairments.

More reading

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Motley Fool contributor Brendon Lau owns shares of Australia & New Zealand Banking Group Limited, Commonwealth Bank of Australia, National Australia Bank Limited, and Westpac Banking. Connect with me on Twitter @brenlau.

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Following a huge run-up in 2019 and the first half of 2020, shares of Apple Inc (NASDAQ: AAPL) have taken a breather recently. The tech stock is down 17% from an all-time high of about $138 this summer.

Is weakness in the tech giant’s stock a buying opportunity? Or should investors hope for an even bigger sell-off before they take a position in the iPhone maker?

Apple’s business is stronger than ever

It’s difficult to criticise Apple’s business. The company generated $275 billion of revenue in the trailing 12 months, up from $260 billion one year earlier. Meanwhile, Apple raked in an incredible $73 billion of free cash flow (cash from operations less capital expenditures).

One potential critique an investor might bring up is the company’s decline in iPhone revenue in Apple’s most recent quarter. iPhone revenue fell 26% year over year during the period.  But Apple bulls would quickly point out that the tech company was up against an unfair comparison during the period since this year’s iPhone launch was delayed by pandemic-related supply chain challenges. In fact, if you rewind one quarter — when Apple wasn’t up against an unfair comparison — Apple demonstrated growth across every product segment and every geographic region. In the company’s most recent quarter, every segment other than the iPhone saw strong double-digit growth despite supply chain constraints for some products. Management went as far as to confidently forecast that its iPhone segment would return to growth during the current quarter.

Then there’s Apple’s $192 billion of cash and marketable securities. Even when subtracting out low interest rate debt, excess cash is $79 billion.

With both a strong business and a healthy balance sheet, the company is unsurprisingly returning lots of cash to shareholders. In the fourth quarter of fiscal 2020 alone, Apple returned $22 billion to shareholders through dividends and repurchases.

But what about that pricey valuation?

Apple’s demonstrating broad-based growth, generating more than $70 billion annually in free cash flow, and sitting on a mountain of cash. But is it worth $2 trillion? This is approximately where the company’s stock price today puts its market capitalisation.

Unfortunately, even though Apple looks well positioned to deliver double-digit earnings growth in the coming years, the stock’s valuation is too steep to make this a no-brainer buy today. Shares currently trade at 35 times earnings — a steep premium that prices in strong growth for years to come.

Sure, Apple stock may be a good buy for investors looking for dividend income. Apple currently has a dividend yield of 0.8%, and it’s grown that dividend payout every year since it was initiated in 2012. But for investors looking for strong share price appreciation over the next five years, it might be worth waiting to see if the stock falls further before buying.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Apple. The Motley Fool Australia has recommended Apple. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Down 17%, is Apple stock a buy? appeared first on Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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