About 10 weeks ago, I wrote a piece in which I professed my love for the new MacBook Pros that Apple Computer (NASDAQ:AAPL) had rolled out. In it, I pointed out being skeptical that the company would be able to live up to growth rates that were being priced into its shares.

Two things have changed since I wrote that piece. Apple's shares have slid from $86 a share then to $62 now -- they fell as low as $57.67 on Wednesday -- and I broke down and purchased a MacBook Pro for myself. I'm quite happy with the purchase, but I'm back again today to talk about Apple and its valuation, because I received a number of emails on the subject the last time around and because when a company's shares fall by 30%, it makes sense to re-evaluate the situation.

When quality and value converge
Last time around, a couple of people noticed I own Microsoft (NASDAQ:MSFT) shares and cutely suggested in emails that I'm biased for this reason. It's an argument that holds some water on the surface, but dig a little deeper, and I think you'll be able to see why I can own one and have more admiration for the other's products. I own shares of Microsoft because the company consistently generates tremendous sums of free cash flow, has a strong-enough position that it should continue to generate strong free cash flow, and has begun paying dividends and increasing them at a pretty quick pace.

Microsoft is certainly not firing on all cylinders the way Apple is, but I think the company's valuation has been attractive enough at times the last couple of years to reflect the growth the company is capable of. That's the major difference I've seen between the two companies from a valuation perspective. Both are quality companies, but the growth that investors expect from each company is quite different.

A quick recap
To make things simpler, I'm going to use the following format for growth rates: 10% growth for the first five years, followed by 6% growth for years six through 10, and 3% growth thereafter will be expressed as 10%/6%/3%. When I originally looked at Apple, I found that its shares reflected growth rates of 20%/10%/5% with dilution of 2%, and I used a 10% discount rate. That's extremely strong growth, and it's difficult for any company to achieve. That's not to say it's impossible, but my personal experience with buying shares of companies in which expectations are so high for such a long period of time has taught me to avoid such situations, because they rarely work out well.

I'm just as surprised as the next guy that Apple's shares have fallen 30% from their highs in such a short amount of time. I have no more confidence in my ability to predict the short term than I did before (I'm terrible at it), and I'm still very skeptical of those who claim they can. There are multiple ways for a company's shares to come back into equilibrium with the free cash flow the company generates. Sometimes, shares will tread water for a couple of years, as Amgen (NASDAQ:AMGN) did from 2003 to 2005 and as General Electric (NYSE:GE) has done the last couple of years. Other times you get large drops, as we have recently seen with Apple.

Where things stand now
Today, there's much less growth priced into Apple's shares. If I use the same dilution assumption of 2% and the same discount rate of 10%, I now find that Apple's shares are priced for growth of 12%/9%/4%. Those are still strong rates of growth, but they're far easier to achieve than the 20%/10%/5% that the shares had priced fewer than three months ago. Finally, if dilution comes in lower than the 2% I have estimated (which is doubtful, since 2% is well below the 5.5% the company has averaged the last three years), then the shares start to look somewhat attractive.

One nagging issue remains for me. How is this time different for Apple than the other times when the company had early success only to watch it slip away? I don't have a good answer. Apple's position in music with the iPod and iTunes still looks dominant, and I think the company's consumer computers continue to get better. But I don't see a moat that keeps people from switching to competitors' offerings in the long run. There are some switching costs to moving a music library, but I don't consider them to be so large as to be inhibiting. Apple is certainly the innovator in a number of areas, but technology can change very quickly, and I think Apple's success is dependent on its ability to remain the most innovative company in its industry. I find companies like this the most difficult to forecast from a sales and profitability perspective.

Foolish final thoughts
I consider Apple to be far more attractively valued than it was just 10 weeks ago. The company may experience some hiccups as it transitions away from IBM (NYSE:IBM) PowerPC chips to Intel (NASDAQ:INTC) chips, but the long-term growth built into the share price is much more reasonable now than it was just 10 weeks ago.

As much as I'm enjoying my new MacBook Pro, and as much as I admire Apple's other products, I won't be running out to pick up Apple shares anytime soon for a couple of reasons. I'm not yet comfortable with dilution at Apple, given the current share price, and I'd like to see shares trading at a discount to growth rates in the 12%/7%/3% ballpark. That discount allows a bit of safety if Apple were to fall out of the innovation lead for a brief spell.

Depending on the future you see for Apple, you could arrive at a very different answer, and that's what investing is all about. Stick to situations where you feel comfortable with a company's future performance and its current valuation, and earning market-beating returns not only becomes easier to achieve, but less stressful as well.

For more Foolishness on Apple:

Microsoft is a Motley Fool Inside Value selection.

Philip Durell, analyst of Motley Fool Inside Value , scours the markets looking for attractively valued investment opportunities. In a little more than a year, Philip has outperformed the market (as measured by the S&P 500) 13.5% to 8.7%. If you'd like to join the hunt for the market's hidden values, test-drive a 30-day trial to Inside Value for free. You'll get two stock picks per month, access to all the selections to date, and a Foolish community of like-minded investors in pursuit of a bargain.Clickhereto learn more.

Nathan Parmelee owns shares in Microsoft but does not own shares in any of the other companies mentioned. You can view his profile here. The Motley Fool has a disclosure policy.