Apple Inc. (AAPL), Microsoft Corporation (MSFT), Nokia Corporation (ADR) (NOK): Wednesday’s Top Upgrades (and Downgrades)

With a P/E ratio of only 12.4, and more than $25 billion in net cash, this makes for a most attractive relationship between earnings and growth rate. Add in the fact that Apple Inc. (NASDAQ:AAPL) continues generate superior free cash flow — $43.2 billion over the past year, versus only $37.7 billion in reported GAAP earnings — and this “cheap” stock may be even cheaper than it looks — assuming the analysts are right about the growth rate.

Verizon? Seriously?

Speaking of growth, one thing we can say about Verizon Communications Inc. (NYSE:VZ) for sure: it’s growing… something.

Analysts only see earnings at the telecom giant growing at about 10% annually over the next five years. However, the company’s plan to spend $130 billion buying out Vodafone’s interest in Verizon Wireless guarantees that Verizon’s debt load will be growing. Even if, as expected, Verizon only pays for about $60 billion of its purchase price in cash, it’s likely that Verizon’s debt load will soon approach $110 billion, putting the company within a whisker of a quarter-trillion-dollar enterprise value — $241 billion.

Is the company worth it? R.W. Baird thinks so, and the analyst upgraded Verizon to “outperform” today. But why?

Verizon itself earned about $1.56 billion over the past year. Verizon Wireless, however, earned $16.7 billion, according to S&P Capital IQ. Even without profits from the parent company’s legacy landline business (which appear to have been negligible last year), this suggests a modest-seeming 14.6-times-earnings valuation on an integrated Verizon stock.

Assuming Verizon achieves its projected 10% earnings growth rate, and assuming the company can afford to maintain its 4.3% dividend yield, on balance, the stock looks fairly priced to meet today — and Baird looks right to recommend it.

No Pitch

Motley Fool contributor Rich Smith owns shares of Apple. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple and Microsoft.

The article Wednesday’s Top Upgrades (and Downgrades) originally appeared on Fool.com and is written by Rich Smith.

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