I often get emails saying "Who cares about valuation? This is a great company." Unfortunately, valuation does matter. Even if you buy a great company, paying too much can sentence you to a period of relative underperformance as the stock works off some of that excess.

Take Pall (NYSE:PLL), for example. This filtration and purification company is basically OK, but the entire sector went a little nutty in the wake of 3M's (NYSE:MMM) purchase of CUNO. When you combine modest growth with a rich valuation, is it any great surprise that the stock has lagged the S&P 500 over the past year?

Results for the company's fiscal first quarter were basically more of the same, with modest sales growth of 4%. While reported net income rose more than 15%, I calculate that operating income actually fell slightly from last year when you strip out restructuring charges. I wasn't too surprised to see continued solid growth in Asia, but I didn't quite expect to see better sales growth in Europe (3% in local currency) than in the company's Western hemisphere operations (1% in local currency).

Pall's segment operating profits are fairly subdued across the board. Profits in the medical business dropped the sharpest, down about 27%. Only aerospace and microelectronics, which combine for more than 30% of total segment profits, showed improvement, growing 40% and 5% respectively.

Here's a decent business with meager growth and single-digit returns on invested capital. Yet it trades at a trailing P/E around 25, and a price-to-cash flow ratio of over 15. Why, exactly, should I buy this? Especially when I could pay less -- relative to growth, anyway -- for Millipore (NYSE:MIL), Donaldson (NYSE:DCI), or 3M? Unless there's some compelling angle that I'm missing, Pall just doesn't make sense to me right now.

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Fool contributor Stephen Simpson owns shares of 3M but has no financial interests in any other stocks mentioned.