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Google is overpriced IMO, their PE has been at around 30 for quite a while. At their size it's extremely hard, if not impossible to keep growth at level to just

Google is overpriced IMO, their PE has been at around 30 for quite a while. At their size it's extremely hard, if not impossible to keep growth at level to justify the high PE. Google's PE should be around 15-20, max. Personally, I'd rather own MSFT, better diversified and offers a dividend. Their SE is unbearable without ad blockers already.

encoderer 13y ago
There's a metric for this, the PEG ratio. It's P/E divided by real growth rates. Googles PEG is about 1.5. "1" is considered ideal, less than one is a "deal", over 1 is not. But 1.5 isn't bad. Amazon, for example, is around 4, even now after the correction.
- marvin 13y ago
  It doesn't really make sense to compare this number with other companies in the same sector. Long-term, the stock price needs to reflect the actual income and growth of the company. Otherwise we are in "greater fool" territory. There is good reason to be skeptical of Amazon's valuation, and that of many other tech companies. (Not that for the record, I am almost exclusively a growth investor in the speculative part of my portfolio). Google still has room to grow, though. I am actually more worried about Facebook's risk/reward profile.
- whoismua 13y ago
  But I think their growth is artificial and not sustainable. It's obvious that their growth has been achieved by adding more ads to the pages even as their CPC is crashing. .
  - encoderer 13y ago
    It sounds like what you have is an investment thesis :) Put some money behind it! Maybe you're right..
    - whoismua 13y ago
      Put some money behind it! Maybe you're right.. "Markets can remain irrational a lot longer than you and I can remain solvent." comes to mind ...I was right two years ago but Google continues to surprise me with their audacity and ability to suffer no penalties by users and governments. But eventually everything will be ads and someone might notice ;)
applecore 13y ago
Google has huge cash reserves ($60 billion), so you really should look at P/E adjusted for cash and cash equivalents on their balance sheet. Ex-cash, it's about 19.

encoderer 13y ago

There's a metric for this, the PEG ratio. It's P/E divided by real growth rates. Googles PEG is about 1.5. "1" is considered ideal, less than one is a "deal", over 1 is not. But 1.5 isn't bad. Amazon, for example, is around 4, even now after the correction.

marvin 13y ago
It doesn't really make sense to compare this number with other companies in the same sector. Long-term, the stock price needs to reflect the actual income and growth of the company. Otherwise we are in "greater fool" territory. There is good reason to be skeptical of Amazon's valuation, and that of many other tech companies. (Not that for the record, I am almost exclusively a growth investor in the speculative part of my portfolio). Google still has room to grow, though. I am actually more worried about Facebook's risk/reward profile.
whoismua 13y ago
But I think their growth is artificial and not sustainable. It's obvious that their growth has been achieved by adding more ads to the pages even as their CPC is crashing. .
- encoderer 13y ago
  It sounds like what you have is an investment thesis :) Put some money behind it! Maybe you're right..
  - whoismua 13y ago
    Put some money behind it! Maybe you're right.. "Markets can remain irrational a lot longer than you and I can remain solvent." comes to mind ...I was right two years ago but Google continues to surprise me with their audacity and ability to suffer no penalties by users and governments. But eventually everything will be ads and someone might notice ;)

applecore 13y ago

Google has huge cash reserves ($60 billion), so you really should look at P/E adjusted for cash and cash equivalents on their balance sheet. Ex-cash, it's about 19.