Is Google Inc. Stock Overvalued?

Google (NASDAQ: GOOGL  ) stock has been on fire recently, soaring past $1,000 last year and gaining a total of 43% in the past 12 months. With such an incredible run-up in the stock price, it's a great time to revisit valuation. What's the stock really worth?

Fool contributor Daniel Sparks recently ran some numbers to come up with a ballpark figure for the fair value of Google shares. Using a discounted cash flow valuation model with a 10% discount rate, Daniel suggests that Google is fairly valued at best.

But even if Google stock were overvalued, it probably wouldn't be wise for investors to sell. As long as the underlying business is meeting or exceeding expectations, it's usually best for shareholders to hold even when shares seem overvalued. Of course, if shares get into grossly overvalued territory, that would be another story -- but Google isn't even close to that point.

Find out more in the following video about how Daniel valued Google.

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Read/Post Comments (6) | Recommend This Article (0)

Comments from our Foolish Readers

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  • Report this Comment On March 26, 2014, at 1:58 PM, venupado wrote:

    Let me summarize the article: No, goog is not over-valued.

    What a waste of time this article is!

  • Report this Comment On March 26, 2014, at 2:18 PM, TMFDanielSparks wrote:


    As I explain in the video, the answer would depend on how bullish you are about Google going forward.

    Also as I say in the video, my personal opinion is that Google is "fairly valued at best." That would imply it's basically overvalued -- just not overvalued enough to sell. But this has implications for investors; it means I wouldn't buy at today's prices.

    What do you think about Google stock?

  • Report this Comment On March 26, 2014, at 9:33 PM, yahoo123 wrote:

    @ Daniel Sparks - How much you know about google ?

    This is b u l l -s h i t article about Google Stock.

    You even don't know what they are doing.

  • Report this Comment On March 27, 2014, at 9:31 AM, dismalscientist1 wrote:

    Firstly, I think the video is misleading. Why are you talking about earnings in the video but then using a DCF to value the stock? Did you just take the ending cash balance and grow it, or did you fully model the free cash flows for the 10 years?

    I think the 10% / 12% discount rate seems a bit aggressive given the size of GOOG and when compared to US LT bond yields.

    I don't think you've "excercised the proper diligence" in putting this recommendation out, which is very irresponsible. I agree with yahoo123, I don't think you know what you are doing.

  • Report this Comment On March 27, 2014, at 1:16 PM, caprivi wrote:

    He got you to click on the title and visited his page, so "Mission Accomplished!"

    (Click phishing at its finest)

  • Report this Comment On March 29, 2014, at 4:31 AM, hennrymark70 wrote:

    Google is strategically positioned to grow in several directions with its diversified portfolio. It is still valued fairly cheaply, compared to the new companies on the block, and the analysts recommend the company as a buy and

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Daniel Sparks

Daniel is a senior technology specialist at The Motley Fool. To get the inside scoop on his coverage of technology companies, follow him on Twitter.

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