A price/earnings ratio of 10 is fairly common for blue chip stocks. It certainly isn't priced for growth, so presumably investors think that Apple's earnings ha

A price/earnings ratio of 10 is fairly common for blue chip stocks. It certainly isn't priced for growth, so presumably investors think that Apple's earnings have a risk of plateauing. Given how high Apple's earnings are, there's certainly an argument to be made that they can't go much higher without another big hit. Keep in mind that earnings != cash. If you look at their full SEC filing, their net increase in cash was $5.4 billion. Some of that money will be directed towards future R+D, some toward a dividend, and some will stay in the bank or used for acquisitions. Companies with a healthy balance sheet and a lot of cash, like Apple, will either pay a dividend or buyback shares long before the book value of the company (cash + other assets - debt) is greater than their market cap. The market cap is more likely to be close to the book value for a struggling company, in which case the company is at risk for a private buyout + liquidation.