Despite being the stalwarts of the tech stocks, Apple (AAPL) and Google (GOOG) don’t trade for tech stock-like multiples. Apple trades for 12.1 times forward earnings, and Google trades for 17 times. Over the last five years Apple’s earnings have grown 65%, while Google’s earnings have grown 36%. Value investors should know this means the shares are undervalued. In Benjamin Graham’s classic The Intelligent Investor, a fair price-to-earnings multiple is 8.5 plus twice the expected growth rate. Using long-term growth rate projections of 20%, which is near the current projections for Apple and Google, a fair multiple for these companies would be 48.5 times earnings. I don’t believe either of these companies will see multiples like this anytime soon; however, based on earnings growth, even if multiples stay the same, these stocks are attractive investments. The problems with these stocks for value investors are twofold. First, neither offers a dividend, or will for the foreseeable future, so capital appreciation is only way to make money in these stocks. Secondly, since the price-to-earnings ratio is currently irrational, it is very hard to predict. What is stopping Google from growing earnings and trading for a lower multiple, say 12 times forward earnings? In that case the company could continue to excel and still investors would lose money. Furthermore, despite being very stable companies with consistently great earnings, both companies are susceptible to wild swings in investor sentiment. For example, on Monday, Google shares dropped 4.2% because its acquisition target Motorola Mobile Holdings, Inc. (MMI) lowered expectations of future earnings. To continue reading, click here.