Valuation not iPadded

Apple: Apple may be soaring, but the stock still looks a safe valuation bet. The $315 billion tech giant's sales rose an astounding 83 percent in its second quarter, ending on March 26, from the same period last year. Moreover, Apple's operating margin increased slightly, meaning profit almost doubled. Yet adjust for cash, and the stock trades at a discount to the market. That seems too cheap.

The growth of a company ought to slow as it becomes bigger - and Apple is now the second largest in the United States by market value after oil giant Exxon Mobil. But its year-on-year sales growth, already uncommonly strong, accelerated compared with the previous quarter.

It's not all perfectly smooth sailing. Supply chain hiccups are stopping punters getting their hands on the iPad 2, launched last month. Customers wanted the latest edition, which is probably why iPad sales last quarter fell short of what analysts on average expected. But now Apple has what it calls "the mother of all backlogs" of customers waiting. That's a high-class problem, and Apple has a history of solving others like it.

There should be more to come. Sales of the iPhone more than doubled from a year earlier. Yet smartphone penetration in the United States and other developed markets is still accelerating. Moreover, Apple's products are increasingly hot outside its traditional strongholds. Revenue in Asia, excluding Japan, was up more than 150 percent in the quarter from a year earlier and accounted for almost 20 percent of sales. Even the company's Mac computers did well, perhaps benefiting from the halo of its handheld gadgets.

Investors seem somewhat skeptical, all the same. Strip Apple's $66 billion hoard of cash and investments out of its share price, and the stock trades at only about 11 times expected earnings for this fiscal year. Sure, Apple's growth will slow someday, and it could end up wasting some of its cash. Even so, the current valuation suggests a reversal of the current momentum sometime soon. A company that looks near the top of its game - despite getting only partial attention from ailing Chief Executive Steve Jobs - deserves more of the benefit of the doubt.