Since Google stock price (GOOG) reached a historical high and closed at $711.25 on 11/2/07. Google announced its' Q3 earning on 10/18 and followed by it unveil mobile strategy on 11/2. Thus, these events trigger OKII team to understand the fundamental value of it incredible company in this century.
PE analysis result:
With the projection of Q4 revenue and EPS grow 9.8% which yield 4.644 bil and $3.78 respectively. This yields yearly 2007 EPS of $13.44. Due to Google only IPO since end of year 2004, we used the quarterly trailing EPS to study the PE track record from Q4 of 2005 to Q3 of 2007.
The current trading price of $711.25 already surpass the OKII Q4 projected Fair Price of $706.69. This Fair Value Price is calculated using: Average of Historical PE x Projected EPS.
From business owner perspective, average of Google's ROE and ROA (2002 to 2006) is 22% and 34% respectively. It retained all its' net profit for growing the business. This business is healthy where it able to give business owner a 22% of investment return since 2002 until 2006, which is referring to average ROE. The company also showed that it able to utilize its' asset and resource up to 34% by referring to average ROA. No debt and inventory are 2 of the spotlights of Google.
Here is the Deal:
OKII recommend to HOLD Google at present as it is not the right time to buy in yet. A full potential of growing company as its internet or web based tools have flood the entire globe, unlimited exploration and with the WiMAX technology, Google is taking the advantage of "You're connected to Internet Anywhere & Anytime"
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2 comments:
Google was traded at $420 as of 3/17/08. As compare to the fair value price which is $706.69, now it is trading at ~40% discounted price. Think about it, is it the right time to buy?
From AP 3/20: RBC Analyst Cuts Google Price Target to $530 From $675, Cites Slowing E-Commerce Growth
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