It is a company provide free online search engine service with a market share of 70%.
Inc stmt: 3Q08 revenue up 37% vs prior yr, operating income up 31%, profit up 28% and EPS up 27%.
Bal sht: Google has $8.4B cash and with no debt at all (which is great), total assets contains 19% of intangible asset & goodwill. During these years, Google is so aggressive in acquisition and merger activities. With closed to $5B goodwill, it means Google purchased companies with a price higher than what the book value worth.
Risk: 1) Bad economy usually hurt advertisement industry, 2) Competition from Yahoo & Microsoft 3) low cost for advertisers and internet users to switch from one online search engine to another; 4) stock compensation plan looks consistent too high compare to other companies. 5) new product such as Google phone may have lower profit margin
Opportunity: 1) if bad economy trigger the advertiser to switch from traditional media to online search engine/website, then the online advertisement should do far better than historical co-relation between economy & industry advertisement income; 2) new product development, even may lower profit margin, but further diversify the product segments looks health to company's future growth
Current price $315, 08 fwd P/W ratio about 19.2. If the coming 6 years profit growth is 25%, 24%, 23%, 22%, 21%, 20%, then EPS as of 2014 will be $55.4, assume future growth of 18%, Google's stock price should be able to rise to $1000 by the end of 2014.
Of course, a more realistic target value will be $480 based on 11.5% discount rate.
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