The 3 most undervalued tech stocks: Google, Apple, IBM by Philip Elmer-DeWitt @FortuneMagazine June 19, 2011, 11:32 AM EST E-mail Tweet Facebook Google Plus Linkedin Share icons By the same “PEG” measure, the 3 most overvalued are Amazon, Cisco and Netflix Click to enlarge. Date: NASDAQ. Chart: PED Here’s a simple exercise suggested by one of my readers. Take a stock you’re interested in and calculate its price/earnings to growth ratio, better known as its PEG ratio. The formula looks like this: According to Peter Lynch, who popularized the measure, the P/E ratio of any company that’s fairly priced will equal its growth rate. In other words, a stock with a PEG ratio less than one is probably undervalued. Conversely, if you’re paying more than a PEG of 1.0 for a stock, you’re probably paying too much. So what’s Apple’s AAPL PEG Ratio? According to NASDAQ’s website, which uses the 12-month forecast earnings and growth rates of a consensus of financial analysts, it’s 0.73, considerably less than 1.0. The only major tech stock with a lower PEG ratio is Google GOOG at 0.59. On the other end of the spectrum are Amazon AMZN , Cisco CSCO and Netflix NFLX with 12-month PEG ratios of 10.65, 8.03 and 6.71, respectively. Go figure.