Have you seen the new wares that Apple Computer (NASDAQ:AAPL) rolled out this week at Macworld? I've got my eyes on the PowerBook replacement MacBook Pro, which is one of the first two machines from Apple (the iMac being the other) that use the new Core Duo chips from Intel (NASDAQ:INTC). Like many, I had been waiting for a refresh to the PowerBook line before going out and getting a laptop.

I'm sure some of you at this point are saying, "Isn't this the same guy who bashed Apple six months ago?" Well, first of all, I wouldn't call what I wrote bashing, just my honest appraisal of the company's executive compensation practices. Secondly, wanting to buy a product from a company and wanting to own its shares are two very different things. I like Apple's products a great deal, the stock not so much.

Apple's shares have delivered wonderful returns in the past few years, no question. Naturally, with the share performance so rewarding and Apple's products hotter than ever, I find more and more people and Apple-specific weblogs touting continued strong performance of the shares. That's fine, but I do wonder what people are getting into.

To get an idea of Apple's stock valuation, I've been working today on a back-of-the-envelope discounted cash flow analysis. Generally, I'm much more interested in deep-value or dividend-paying investments, so smoking-hot shares like Apple's aren't ones on which I would normally perform a valuation analysis. But Apple's cult-like following and the buzz surrounding its new products have made me curious.

I've looked at slow, average, and robust growth rates, and at various levels of dilution from stock options, and I've even included Apple's $8.2 billion cash hoard in the mix. My rosiest estimate assumes that Apple will grow its free cash flow of $1.8 billion (I have also taken out tax benefits from stock options) by 20% a year for the next five years, 10% for years six through 10, and 5% for years 11 through eternity. I've also assumed a discount rate of 10% and stock dilution of only 2%, which is low, considering that Apple's diluted share count has increased by an average of 5.5% the last three years. This gives me a value of $87 a share, which is about 2% higher than where Apple shares trade today.

My middle and low estimates, which assume growth of 17% for the first five years, 8% for years six through 10, 5% or 3% for the remaining years, and dilution of 4% or 5%, give me estimates between $50 and $60. I consider all of these growth figures to be quite strong, and very few companies accomplish this kind of growth for such a long period of time. However, it does happen, and I was more focused on what Apple needs to do to warrant its current price than I am on trying to set any kind of realistic price target on Apple. Investors should note, however, that if Apple performs somewhere between my middle and low growth estimates, the stock price could fall by more than 30% from current levels.

I wouldn't buy Apple shares, because I'm skeptical that the company can remain dominant for the entire next decade. My warning here isn't intended to make investors sell their Apple holdings. I simply want to make investors aware of the elevated growth rates that Apple must achieve for shareholders to continue earning a decent rate of return from here. If you feel comfortable that Apple can grow at 20% per year for the next five years and double digits for five more years after that, there may still be a little value left in Apple shares. Those assumptions seem to be like trees growing to the sky to me, but your opinion may differ.

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Nathan Parmelee has no financial stake in any of the companies mentioned. The Motley Fool has an ironclad disclosure policy.