(FORTUNE Magazine) – Cash is king. Always has been, always will be--except, perhaps, for a brief moment during the late, great bull market, when stock became the fresh prince of the buyout game. Predators like Cisco, Microsoft, and, yes, America Online (now part of FORTUNE's parent company, AOL Time Warner) shelled out wads of inflated shares to fuel shopping binges. Now that the markets have soured, however, sellers are unwilling to trade their companies for potentially worthless wampum, and cash has become king again. Cash has accounted for fully 35% of the value of all U.S. M&A deals this year, the highest percentage since 1994, according to Thomson Financial Investment Banking/Capital Markets. Two recent megadeals powered by cash: Sears Roebuck's all-cash buyout of Lands' End for $1.9 billion, and Microsoft's cash and stock offer to buy Navision, a Danish maker of business software, for about $1.3 billion. (Microsoft's previous biggest outright purchase, its $1.1 billion acquisition of Navision competitor Great Plains Software in 2000, was an all-stock deal.)

The upshot of this return to cash: Public investors now have a real barometer for what their holdings are worth--namely, the valuations paid by corporations that are depleting their treasuries to do a deal. "Before, the angle for a buyer was, 'This is a tiny little portion of my business that I'm giving away,'" says Karen Payne, who runs Pacific Edge Investment Management, a tech-oriented hedge fund in Palo Alto. "Now it's more like, 'How much cold, hard cash am I willing to spend?' " As an investor Payne uses the same measurements as investment bankers to evaluate a deal. Both look at "comps," or comparable valuations. If strategic buyer X is willing to shell out a certain amount for each dollar of sales, the thinking goes, an open-market investor should be willing to pay a similar amount for a similar company.

So what can this measure tell us as investors? We trained our calculating lenses on the "comps" of a few recent takeover targets. The results were surprising: There are some decently priced stocks out there.

Start with companies that compete with networking equipment maker Unisphere Networks. In late May, Juniper Networks, the router maker, agreed to pay about $700 million for Unisphere Networks. About half will be paid in cash, with the balance in Juniper stock. Unisphere, in Westford, Mass., isn't profitable and has about $200 million in 2001 revenues. Do the math on similarly sized competitors Redback Networks ($2, RBAK) and Extreme Networks ($12, EXTR), and a divergence in valuation emerges. By the Juniper-Unisphere gauge, Redback is selling for less than half its true "value." Extreme, by contrast, sells for just a slight discount.

Comps work in software as well as hardware, and niche players there could conceivably get a boost from Intuit's recent buying binge. In early June the tax-and-finance-software maker snapped up privately held Management Reports for $92 million in cash, or about 2.3 times the property management software firm's 2001 sales. By that measure, Timberline Software ($6, TMBS), which sells to the construction industry and brought in $57 million last year, looks significantly undervalued, while newly public PracticeWorks ($16, PRW), which drills down in the dental category, may already be a bit rich.

Restaurants are red-hot, and Wendy's International's recent all-cash offer for Fresh Enterprises sheds light on the valuations of some the market's best-performing stocks. Fresh Enterprises, owner of Baja Fresh Mexican Grill, was in registration to go public before Wendy's swooped in with its $275 million offer, equal to 3.5 times Fresh Enterprises's annual sales. That suggests potential value in California Pizza Kitchen ($24, CPKI), which is selling for just half of what Wendy's is paying to add fajitas to its menu. But Panera Bread ($64, PNRA) already trades for 4.4 times its 2001 sales, making it overvalued by about 20%.

Of course, this analysis only goes so far. Cautions Jeff McKenzie, a managing director with investment bank and valuation specialist Houlihan Lokey Howard & Zukin in Los Angeles: "One deal does not a trend make." If you think a company whose stock you own is takeover bait in an industry with cash buyers, perhaps you've got an undervalued asset on your hands. But be careful: Cash doesn't make an investor right. Just serious.