Cirrus Logic (CRUS) is a developer of integrated circuits for use in the audio (in portable devices, electronics, and automotive) and energy (power meters, LED lighting, and motor control) segments. The company has struggled for most of the year; in April, a production issue with an audio chip caused the company to take a charge of 6 cents per share ahead of fiscal fourth quarter earnings. Fears that the chip was a component of Apple (AAPL)'s iPad 2 drove the stock down some 12%. The company then was hurt by first and second quarter results, gapping down by double-digits each time, mostly due to disappointing guidance.

And yet, despite three consecutive earnings disappointments, and three drops of 12-14% in the span of just eight months, CRUS stock has held up surprisingly well. At Thursday's close of $16.39, the stock is actually up slightly from its close in April after disclosing the yield problems with its audio chip, well ahead of a double-digit loss for the Philly Semiconductor Index (SOX). It sits 36% below its 52-week high of $25.48, set back in March; a steep drop, to be sure, but far from unique in a sector that has seen many stocks fall by one-half or more.

The catalyst for CRUS' resilience appears to be its relationship with Apple. 59% of sales in the second quarter (ending September) were to Apple, or "Our #1 Customer," as Cirrus Logic's earnings presentation coyly refers to Cupertino. (The 10-Q gives away the secret.) Cirrus claims that its audio chips are in "all major Apple product lines": the iPhone, iPad, MacBook, and iMac.

In addition, Cirrus Logic has posted strong growth numbers. Revenue doubled from FY2009 to FY2011 (both years ending in March), and will grow an additional 7.4% for the first nine months of FY2012 at the midpoint of third quarter guidance. Earnings have been strong as well, as the company switched from a 7-cent per share loss in fiscal 2008 to an impressive $2.82 per share gain in fiscal 2011.

The problem, however, is that nearly all of Cirrus Logic's growth has come from its Apple relationship. Let's break down recent revenue numbers:

CRUS Revenues, Apple and Non-Apple, FY09-12

*Annualized run rate based on results from first six months.
Data from 2011 10-K and 2QFY12 10-Q.

Take away the Apple relationship, and Cirrus' growth almost disappears -- non-Apple revenue is growing, on average, just a few percentage points a year. Given the boom in the semiconductor industry at large in 2009 and 2010 (for which the sector is now paying in unfavorable comparisons and sharply depressed stock prices), that growth is suprisingly weak.

CRUS' impressive earnings growth disappoints upon further inspection as well. Fiscal year 2011's banner gain of $2.82 per share included tax benefits from a revalued asset of $119 million. Excluding those gains, GAAP income would have been just $1.17 (non-GAAP income was reported at $1.24 per share). Through the first two quarters of 2012, pre-tax income has actually declined, and tax treatment has reversed. Trailing twelve-month pre-tax GAAP income is actually about $1.02 per share, far less impressive than the $2.44 in GAAP earnings published on most stock screeners. (Trailing non-GAAP income now sits at $1.13 per share.)

Free cash flow is even less impressive. Free cash flow (defined here as operating cash flow minus capital expenditures) ranged from $15MM to $19MM in 2008-2010, before reaching $67 million in FY2011. For the first six months of 2012, the company generated just $13 million in free cash. For a company with a billion-dollar market capitalization, and a $900 million enterprise value, the relatively paltry sums of cash generated should do little to entice investors.

In short, the bull case for investing in Cirrus Logic relies almost solely on the company's status as a supplier to Apple. Without that relationship, CRUS is a $5-8 stock -- at best. That kind of customer concentration poses a serious risk to shareholders -- just ask investors in OmniVision, who have seen their stock fall over 70%, due in large part to questions about the placement of the company's image sensors in the iPhone 4S. Cirrus' manufacturing slipup earlier this year -- whether or not it was indeed for iPad components -- proves just how tenuous the supplier position can be, particularly for a customer with the high volume and quick ramp times of Apple.

But even with the Apple relationship remaining in place, it is unclear that Cirrus Logic can maintain the growth rate of the past few years. The company's Apple-related revenue has grown by eight times in three years. Cirrus appears to be a valued and loyal partner, but how much more penetration can it get into Cupertino? Unit growth will continue for Apple; but per-unit prices for Cirrus components will likely stay flat, or decrease, as it often the standard in the semiconductor industry.

Indeed, the sharply lower growth rate in FY2012 -- 7.4%, after 27% and 67% in 2010 and 2011, respectively -- would seem to show the lessening effect of the Apple relationship. At the very least, the continued growth in Apple sales is not offsetting weakness in the Energy Products segment and the company's seeming failure to successfully market its chips to Apple competitors.

And while CRUS' fundamentals may appear moderate -- even cheap -- at first glance, it's important to remember that the stock is priced well ahead of its sector. Semiconductor companies in all segments of the industry are seeing single-digit P/E's as fears of a worldwide slowdown and a supply glut weigh on share prices. CRUS, trading at 14.5 trailing non-GAAP earnings, and 12.6x earnings on an enterprise basis, has been awarded a premium to the sector because of its strong revenue growth and its position as an Apple supplier.

But, again, as noted, the recent top-line growth is almost solely derived from that Apple relationship. Setting aside any risk of a fallout with Cupertino, the question investors must ask is: Why not just buy Apple? Apple closed Thursday at $387.93. Backing out its nearly $90/share in cash and long-term investments, it trades at an enterprise value-earnings ratio around 11. CRUS closed Thursday at $16.59; backing out its $2.15/share in cash, it trades at an enterprise value-earnings ratio of 12.6. Right now, Cirrus Logic can only grow as fast as Apple does. Yet that growth can be bought cheaper in AAPL than in CRUS.

Investors can look to the two stocks as an interesting pairs trade (long AAPL, short CRUS), or CRUS may provide an interesting short opportunity around $17, as the stock continues a series of lower highs. January earnings may provide an entry point for a short sale, given the company's recent struggles after quarterly releases. Any holiday strength (or weakness) in iPad and iPhone sales will likely move Cirrus Logic stock, so investors must stay on their toes. But, for the mid- to long-term, at current valuations, Cirrus Logic looks like a sell.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.