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Google 3-4 years later

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August 28, 2010 – Comments (1) | RELATED TICKERS: GOOGL

This post was written 3-4 years ago when google had a share price of $505.  Seeing how the last quarter in the data I was using was Q3 in 2006, well, that is very close to 4 years.  Back then I worked out earnings growth would have to be 1094% in 5 years (467% in 3.5 years) to support the share price and give a PEG of one, or to about $10 a quarter now.

So, looking back at the last few quarters, $5.71 to $6.22, about 200% growth in almost 4 years. Certainly the earning growth exceeded my expectations.  They have increased cash holdings by about $13 billion since then, not bad, what I was writing about in 2006 and 2007 was $38 billion of market cap being created in 2 months, about 3 times the growth of the cash in 3.5 years, or at the time, the share value was increasing about 60 times faster then the cash...

Certainly when you look at google's share price today, $458.83, down about 10% since I wrote the above post, and the 200% increase in earnings, well, the price today is reasonable.  I am not buying google, but nor am I screaming"are you nuts" anymore...  A few people took some google lumps...

1 Comments – Post Your Own

#1) On August 28, 2010 at 1:29 PM, rofgile (99.43) wrote:

I'll admit that I took a lump on GOOG.  I bought early in the year when the price was near $620/share.  

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I got.. irrationally exuberant.. with Google.  I read the book "Googled" at that time period, and got in my head that GOOG was going to be a media stock larger than Viacom.

But, I do think GOOG is a good investment from this point.  

A) Its the only corporation whose product I use everyday

B) Its got a good product

C) Lots of cash to acquire and build

D) Good management

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 I think people are not pricing in the value of information mining/access yet - GOOG is truly the first of a breed of new companies that will capitalize information. 

 -Rof 

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