Not at all. Here's why.

By Shawn Tully
April 27, 2016

For months, Apple fans have been arguing that its shares were a great buy at well over $100 a share. Now, following the big selloff triggered by its disappointing earnings report on April 27, this great growth enterprise is trading at the levels of a beaten-down value stock. So here’s the question: At these seemingly super-cheap prices, is Apple really a bargain?

The simplest way to answer that question is to determine what Apple aapl needs to earn in order to hand investors an attractive return. To do that, let’s imagine that Apple, the whole company, were a single, gigantic share of stock, with the price equivalent to its market cap. Would you like to buy a share of Apple? That will be $537 billion, please. Thanks! (One could argue that looking at Apple’s shares this way excludes the possible positive boost from stock buybacks, but as I have detailed in the past Apple’s buybacks have actually been a disaster, wasting billions.)

And that’s actually a discount. Since cresting in April of 2015, Apple has lost 29% of its value, shedding $218 billion in market cap, roughly equal to the combined capitalizations of Intel intc and Adobe Systems adbe .

That means investors are expecting a lot less from the iPhone-maker. Indeed, in its earnings report for second quarter of 2016 (ended March 31), Apple’s net profits dropped 22% to $10.5 billion from $13.6 billion in the same quarter a year ago, and its gross margins—the percentage of revenue was left after paying the cost of manufacturing its iPhones and computers—fell to 39.4% from 40.8%. For its third quarter, Apple is predicting a continuing decline in margins, to 37.5%.

Apple’s profit picture is likely to get worse. Apple introduced a new hot-selling iPhone in March. But the SE’s margins don’t match the sumptuous, and unsustainable, profitability of the previous models. So going forward, it’s logical to predict that competition from the likes of Samsung ssnlf , and new generations of lower-margin products, will make Apple a lot less profitable than in the past.

None of this, though, is obvious from looking at Apple’s earnings over the past four quarters. That number is a gigantic $50.7 billion. Using our new imaginary price of Apple’s stock of $537 billion, its price-to-earnings multiple stands at just 10.6, seemingly in deep value range.

But what counts is the future earnings Apple must produce to recharge its stock. Let’s assume that investors want an 8% annual return, and that should be a minimum, given the company’s shares’ extreme volatility of late. Apple just raised its dividend so that it’s paying $5.54 billion a year, for a 2.5% yield. If Apple could grow its annual earnings from the current $50 billion at a seemingly modest 5.5% rate (brining the total return to 8%), it would merit a P/E ratio of around 16.7, and its shares would soar.

Clearly, though, the market is expecting profits not to wax, but to wane, and wane a lot. In effect, the market is forecasting that Apple’s earnings will first drop sharply, and then resume growing, but from far lower levels. Here’s a possible scenario that gets us to that 8% return. In two years from now, Apple’s trailing earnings fall from $50 billion to $35.7 billion, or almost 30%. That brings its multiple to the target of 16.7. From there, Apple starts growing again, posting average earnings increases of 5.5%. That outlook would give investors that 8% return, starting right now.

And remember that earnings number includes inflation. So this seems doable, and it may be.

The risk, though, is that Apple’s income drops well below $40 billion, which is highly likely, and that it keeps shrinking from there. At some point, the big shrink in earnings has to stop, and profits need to rebound. Not a lot, but modestly, for even Apple’s $537 billion market cap to make sense.

Keep in mind that around $36 billion in profits still means Apple must generate huge margins on special products. And to do that competitors can’t come close to replicating. The risk is that it this mostly one-product enterprise can’t keep doing it. Despite the big selloff, Apple still needs to be a one-of-a-kind innovator to make its stock a great buy. If its days of great innovation are over, it won’t happen. And that’s why Apple’s stock is still a lot riskier than it looks.

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