Before I begin with my analysis, let me discredit myself somewhat.

In September 2008, I bought Apple (Nasdaq: AAPL) shares at around $110 per share. After shares ran up, I was proud of myself for playing contrarian during a financial crisis after shares fell from $200 highs.

A year later, happy with my nifty 60% gain, I sold at $180 per share, fearing overvaluation.

As you know, Apple's rise didn't end at $180. Today, shares trade at $300, leaving my 60% gain dwarfed by the 170% gain that could have been.

That's nice, but is Apple a bubble today?
So I'm biased. I'd love to say my analysis was correct -- that Apple was overvalued at $180 a share, and that Apple at $300 a share is a bubble. It certainly feels like a bubble.

Like Treasuries and gold, Apple has had a tremendous run-up. As recently as 2003, shares traded for less than $10 apiece. In other words, those shares have risen more than 30 times in value.

As you may have read, Apple's market capitalization is now second only to ExxonMobil (NYSE: XOM) ... and catching up fast. Think about that. Its market cap is 35% higher than Wal-Mart's (NYSE: WMT).

Add those facts up with the zealousness of the Apple enthusiasts (check out the comments section below) and it's certainly easy to call it a bubble.

But wait...
However, there's just as much evidence saying that Apple is either fairly valued or -- gasp! -- undervalued.

On a trailing basis, Apple's selling for 22 times earnings. Not super cheap, but this multiple drops to 17 on a forward basis. Normally, I'd fear that analysts are being too optimistic, but consider these two points:

  1. Apple has averaged 50% growth a year for the last five years.
  2. Each quarter, Apple sandbags analysts, and then destroys their estimates. Over the last four quarters, Apple beat estimates by 13%, 36%, 77% (helped by an accounting change), and 28%.

And remember that the company's forward P/E ratio of 17 is inflated by Apple's cash hoard. The Mac maker has $45 billion sitting on its balance sheet -- or $50 per share in cash alone. Put a third way, that pile of cash is enough money to buy every share of Nike outright.

When you strip out the cash, Apple is trading for a seemingly too-good-to-be-true 14 times forward earnings.

Is it too good to be true?
That question hinges upon the sustainability and growth of Apple's earnings.

Let's hit sustainability first. At 14 times earnings, Apple needs little further growth to justify its price. That may seem pretty shocking, given Apple's growth-stock reputation.

But in technology, the possibility that a company may come in and make your products obsolete is always lurking. Take a look at Research In Motion (Nasdaq: RIMM). A tech darling only a couple of years ago, its smartphones are now under serious attack from Apple's iPhone and Google's (Nasdaq: GOOG) legion of Android phones. It's trading at less than eight times forward earnings, because its base of earnings is suddenly tenuous.

In Apple's case, its computers are probably safe, given its position in a fragmented market; its iPods are being cannibalized by its iPhones; and its iPhones and iPads are still in their big growth phases. A Facebook-replacing-MySpace event could happen to Apple, but in the near term, the earnings upon which Apple's multiples are based are sustainably real.

Now on to growth opportunities
I see three major growth drivers for Apple, split up by product.

iPhone
Who's going to win the smartphone war, Apple or Google? The closed system or the open system? I predict they'll both win -- at the expense of everyone else. 

At the end of Q1, Nielsen reported that Blackberry had a 35% market share in the U.S., while Microsoft Windows Mobile had a 19% market share. Apple was at 28% and Google's Android was at 9%. By August, Android was up to 19%, while Apple has held steady. (Wait till it gets on the Verizon network!) I believe Apple and Google will establish a Visa-and-MasterCard type of virtual duopoly in the future.

This is important, since smartphone penetration in the U.S. has only reached 23%. Earlier in the year, Nielsen pegged penetration to exceed 50% in 2011. And as a recent convert to an iPhone myself, I can't see many converts ever subsequently going backward to a feature phone.

And these opportunities just cover the United States; the rest of the world remains wide open.

iPad
When the iPad was just coming out, I didn't hear many (any?) people predicting its runaway success. Apple has once again made an incredible product that we didn't know we wanted. And its sales are just heating up.

The unexpected
Speaking of folks underestimating Apple, the third growth driver I'm excited about is the unexpected. Perhaps Apple will finally figure out how to make Apple TV a success -- its integration opportunities with the rest of the i-Universe are tantalizing. Or it could reveal another product we didn't know we wanted.

Who knows? I'm not too concerned, because as I said before, Apple's current valuation doesn't depend on a crazy amount of growth. I'm happy to keep this growth driver in the speculative upside category.

The final call
After all this, do I consider Apple a bubble?

There are compelling arguments that gold is a bubble (watch out, owners of SPDR Gold Trust). There are compelling arguments that the bond market is a bubble (watch out, owners of spread-playing mortgage REITs like American Capital Agency). But -- and I'm as surprised as you as I write this -- I don't think Apple is a bubble.

In fact, I'll go further. It's hard to say this after such a run-up, and considering Apple's huge market cap, but if I had to make a buy or sell call, I'd say buy.

I'm going to keep thinking about it for my own portfolio, but if you plan to become an Apple buyer, know that the company reports its earnings on Monday, Oct. 18. Don't be surprised if the iEmpire beats earnings estimates. Again.

We just talked about how Apple is a major player in the smartphone boom, but you can read about a different tech trend to potentially profit from in our free report: "2 Plays for the Coming Tech Boom." Enjoy!

Anand Chokkavelu owns shares of ExxonMobil. Google and Wal-Mart Stores are Motley Fool Inside Value choices. Google is a Motley Fool Rule Breakers recommendation. Apple and Nike are Motley Fool Stock Advisor picks. The Fool owns shares of Apple, ExxonMobil, Google, and Wal-Mart Stores. Try any of our Foolish newsletter services free for 30 days. True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community. The Motley Fool has a disclosure policy.