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Google: Strong company, inflated stock price

• dpapathanasiou 19y ago
  Good quote: the info-based economy just doesn't require that much capital, so investing mammoth sums almost always leads to lower, not higher, returns. Something to keep in mind when discussing valuations and raising capital.
  • jamongkad 19y ago
    Hmmm that's a point worth thinking about isn't it? I wonder what's PG's thoughts on this...
  • byrneseyeview 19y ago
    Er. He may be talking about diseconomies of scale (it's harder to get a high return invest $1 billion than investing $1 million), which would be nothing new. Or he's claiming absolutely lower returns (earning $5 million on a $10 million investment versus earning $2 million on a $20 million investment), in which case he's almost always wrong. There are a small number of cases where a startup would have lasted longer if they'd raised less -- but there's still a pretty strong correlation between having lots of capital and getting a high absolute return.
• byrneseyeview 19y ago
  "Here's what it found: To live up to the expectations embedded in its current share price, Google would have to increase its EVA, which was $2.4 billion for the past four quarters, by $2 billion annually this year, next year, and every year into the future - forever. So Google's EVA next year would have to be $4.4 billion; in five years it would have to be $12.4 billion, and so on." That's one way to look at it, but that's assuming that it's going to grow earnings linearly, rather than exponentially. Google isn't growing linearly, and they haven't in the past (look at their record from 2002 on: $99,656, $105,648, $399,119, $1,465,397, $3,077,446). Under no circumstances would one thing that the best fit here is linear growth.