For Apple, There's No Such Thing as Expensive

NEW YORK ( TheStreet) -- It always amazes me to see that whenever tech giant Apple ( AAPL) comes up, analysts go out of their way to "one-up" each other in describing the company. It is as if there are yet things that can be said about the company's success that has not already been said. That in and of itself demonstrates just how popular the company is -- and how through its words or image Apple systematically does things that makes one question his or her own ability to rationalize.

The company has become not only the anchor of the stock market, but the beacon of innovation for the world. (How's that for my own "one-upping" attempt?) That it has surpassed Exxon Mobil ( XOM) as the world's largest company -- to the extent that it is now larger than Microsoft ( MSFT), Cisco ( CSCO) and Intel ( INTC) combined -- leads to the other popular component of any discussion that involves Apple: Its valuation. This is something many investors still do not fully understand. It seems the biggest source of disconnect, continuing due to a lack of appreciation between the difference of price and value.
Despite operating in a cut-throat industry, there are no meaningful signs Apple is slowing down.

While many are quick to proclaim how expensive the equity is merely by looking at its stock price, I look at that valuation and see an equity trading at a considerable discount relative to its earnings potential. The stock is trading at a forward price-to-earnings ratio of only 10. That is in line with other technology companies, including its rivals in Google ( GOOG) and Microsoft. That is considerably discounted to the forward P/E of 85 that Amazon ( AMZN) enjoys, though, and much lower than the 62 a company such as ( CRM) carries.

Here's some perspective: In Apple's second-quarter results, the company continued to demonstrate just how dominant it is by earning $11.6 billion, or $12.30 per share, for the quarter -- almost matching what it earned for the entire fiscal 2010 calendar. So why is the market expecting more from Salesforce than from a company that has dominated the sector over the past five years, to the point where it is now on the verge of putting former market leader Research in Motion ( RIMM) out of business? If that is not an indictment on the lack of intelligence that roams Wall Street I don't know what is.

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