Apple iPad releaseFeverish anticipation over the iPad release and reports that the iPhone will come to Verizon Wireless (VZ, VOD) in the not-to-distant future have Apple's (AAPL) shares ripping higher. Apple stock hit an all-time intraday high of nearly $239 Thursday and have almost tripled since the market hit bottom last spring.

When a stock delivers that kind of crazy outperformance -- the S&P 500 ($INX) is up 75% over the same span -- it's probably a good idea to look at the relative valuation. Blind faith in Apple, the iPad and Steve Jobs aside, it is possible for a stock's price to get ahead of what a company can deliver in earnings. That's why it's remarkable that even after popping 5% in the last two weeks, Apple still looks compelling, even at these levels.

Take a look at the valuation. Apple's forward price/earnings (P/E) multiple of 22 offers a 30% discount to its own five-year average, according to data from Thomson Reuters. More interesting, shares trade essentially in-line with the S&P 500, and yet Apple's profits are expected to grow much faster than the broader market's. Shares are similarly discounted on a trailing earnings basis, according to Thomson Reuters.

Not a Bargain, but Hardly Expensive


Let's also not forget that Apple is sitting on a hoard of about $24 billion in cash and short-term investments -- cash that rightfully belongs to stockholders to the tune of 27 bucks a share. Back that out, and Apple's forward P/E drops from more than 22 to less than 18.

Finally, there's the price/earnings-to-growth (PEG) ratio, which measures how fast a stock is rising relative to its growth prospects. Even after outperforming the S&P by more than a hundred percentage points since the March 2009 low, Apple's PEG still offers about a 40% discount to the broader market. The stock also trades at roughly a 20% discount to its own five-year average.

That's not to say Apple's stock is a bargain at these levels -- just that the stock hardly looks too expensive. Either way, keep in mind that with the market closed Friday and the iPad launch scheduled for Saturday, shares could very well sell-off Monday. Wall Street has a nasty habit of "buying the rumor" and "selling the news."

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