I remember the days when you could set your watch to the earnings reports of the big tech stalwarts. Intel (NASDAQ:INTC), Microsoft (NASDAQ:MSFT), and Cisco (NASDAQ:CSCO) would all roll out stellar results with plenty of free cash flow. But the triumvirate has stumbled recently, and more boring, old-world stocks have challenged their role as the "old reliable" of the Nasdaq. My pick for the top successor is Staples (NASDAQ:SPLS), especially after this morning's earnings report.

First-quarter 2005 net income came in at $159 million, up 27% from the same period a year ago. Sales were up 13%, and critically important comparable-store sales rose 4% for the third straight quarter in North America. Guidance was also positive. Management says that it expects sales and earnings to both achieve double-digit growth for all of 2005.

The only remaining question: Is Staples' stock cheap enough to be considered a buy by the common Fool? It's worth noting that management expects earnings to grow at the high end of its 15%-18% range. Free cash flow, however, was down from last year's first quarter, to roughly $100 million. Taking the trailing 12-month free cash flow number -- or $817 million -- and plugging it into the discounted cash flow calculator at Motley Fool Inside Value (subscription required, free trial available) gives us enough to get started with a valuation.

We'll also need Staples' total outstanding share count (742.89 million, according to Yahoo! Finance), analyst estimates for Staples' 5-year growth rate (15%), and the current stock price, $21.34, or up roughly 4% as of this writing.

Finally, we'll need to select a discount rate -- otherwise known as our minimum rate of return for the shares -- and growth rates for years 6-10 and beyond. Staples is a large firm, so a 12% discount rate ought to suffice. Let's assume 7% growth after 2010 and 3% growth after 2015.

What do the numbers reveal? An intrinsic value of $23 per share. Be warned: This is a rough cut. But it's probably not that far off, and that puts the shares a little close to today's valuation for my comfort. Still, Staples' 1.17% dividend yield is attractive, as is its history of boosting the dividend as often as cash flow permits.

Sure, these pencil-pushers have gone past the point of being a highly attractive growth stock, but given the conditions of the market so far this year, your portfolio could do a lot worse.

We've collated these related Fool takes:

  • Staples offers more black than red ink.
  • The pencil pushers gunned it a year ago, too.
  • Why is Staples doing so well? Maybe because it has so far outrun its rivals.

What do you think? Is Staples' stock undervalued? Share your thoughts with other Fools at the Staples discussion board.

Motley Fool contributor TimBeyers loves Staples, but shops at Office Depot.Tim didn't own shares in any of the companies mentioned in this story at the time of publication. You can find out what's in his portfolio by checking Tim's Fool profile, which is here. The Motley Fool has a disclosure policy.