"Is It Safe?" looks at a company's risk-and-reward potential. Find out if your stocks are safe at 4 a.m. on Tuesdays and Thursdays.

Under Steve Jobs,


(AAPL) - Get Report

has become a commercial and cultural phenomenon. After all, Jobs introduced the world to the iPod and iPhone.

Since Jobs' January departure to tend to health concerns, Apple's stock has soared 68%. And with his expected return this week, many expect Apple to rally to even greater heights. Those expectations are probably exaggerated.

There's no doubt Apple has been wildly successful. With more than 1 million iPhone 3G S units sold since its release last month and rabid coverage of releases hyping products far more than any other ad campaign, logic suggests that the Apple machine won't slow anytime soon.

Image placeholder title

However, suggesting that Apple will become a better company now that Jobs has entered the building is irrational. Large companies are more like ocean liners than sports cars: Changes are slow and arduous. Strategic choices that have affected Apple's recent run were made most likely by Jobs and his team months, quarters or even years ago.

While Jobs has been out of commission for half a year, he hand-picked his successors. They are more than capable of keeping the lights on and implementing the business plan he created.

While Apple may not blast into the stratosphere with the gadget guru's return, it's still a solid investment. More than 39% of first-quarter revenue came from iPods and iPhones, lines with a high degree of turnover, leading to repeat sales.

With iPod and iPhone sales far outpacing other major launches, such as the



Pre and BlackBerry Bold by

Research in Motion


, investors have been licking their chops at the thought of juicy profits to come at Apple. Most of that is already priced into the shares, though.

With a price-to-earnings ratio of 25.5, Apple is overvalued. The industry average is 22.9, suggesting Apple has run too far. Also, with a beta of almost 1, Apple appears to be moving in line with the market when considering long-term performance. (Beta, in part, measures a stock's correlation to the stock market.)

Apple looks even more overvalued when considering its price-to-sales ratio. At 3.76, Apple's P/S ratio is more than twice that of the industry.

Despite recent outperformance, investors who bought Apple at this time last year have lost money. With a one-year return of minus 16%, Apple's performance leaves something to be desired.

Investing in hotly followed stocks that have a devoted group of fans is tricky. With the amount of media coverage and hype that surrounds Apple, it's difficult to have an insight on valuation that hasn't been covered and, therefore, priced into the stock.

Apple is a strong company that's in a dominant market position. Profit will no doubt be robust and sustainable for the foreseeable future. However, at its current valuation, the company's stock is unattractive.

Jobs is clearly an effective and valuable chief executive. His leadership and insights, however, don't compensate for Apple's rich stock price.

TSC Ratings provides exclusive stock, ETF and mutual fund ratings and commentary based on award-winning, proprietary tools. Its "safety first" approach to investing aims to reduce risk while seeking solid outperformance on a total return basis.

Prior to joining TheStreet.com Ratings, David MacDougall was an analyst at Cambridge Associates, an investment consulting firm, where he worked with private equity and venture capital funds. He graduated cum laude from Northeastern University with a bachelor's degree in finance and is a Level II CFA candidate.