We're heading into a pretty important week in the seemingly endless debate as to whether Google (NASDAQ:GOOG) or Yahoo! (NASDAQ:YHOO) is the superior search-engine investment. The headline alone should tell you where I stand. I'm a big fan of Google. However, there are plenty of sharp Fools around here who favor Yahoo!. Case in point? Yahoo! is a popular recommendation in the Motley Fool Stock Advisor newsletter service.

So let me begin my case by illustrating why the next few days will carry colossal weight in this argument. Yahoo! reports its fiscal third-quarter results tomorrow and Google follows on Thursday. Let's take a look at how earnings per share have clocked in at both Internet titans, as well as what analysts are expecting to hear later this week.

Yahoo!

Google

Q3 2005

$0.16

$1.51

Q4 2005

$0.16

$1.54

Q1 2006

$0.11

$2.29

Q2 2006

$0.11

$2.49

Q3 2006 est.

$0.11

$2.42

Data provided by Yahoo! Finance.

Add up the four past quarters and Yahoo! is trading at 45 times earnings of $0.54 a share. If you see figures that show a lower P/E floating around, it's because they are including one-time gains from last year, when Yahoo! unloaded its richly appreciated Google shares. Naturally, we can't use that in valuing the company.

Come Tuesday, analysts expect earnings to dip to $0.11 a share from a $0.16 a share showing a year earlier. That is not the reason why I favor Google at this point. I'm actually willing to cut Yahoo! some slack here as it suffers through some operational issues. Yahoo! is actually expecting its top line to inch 23% higher for the period.

However, we can't ignore the impact of declining profitability on a stock's P/E ratio. If all goes according to plan, that nickel-per-share difference in net income will find Yahoo! trading at 50 times earnings of $0.49 a share (based on Friday's close of $24.42).

Like passing ships they'll be
Now let's take a closer look at Google's report on Thursday. With trailing earnings of $7.83 per share and its stock starting off the new trading week at $427.30, Google is now trading at 55 times earnings.

Unlike Yahoo!, Google's earnings are looking to shoot higher. Analysts see profits climbing from $1.51 per share to $2.42 per share -- on a robust 73% surge in revenue. What does this drop Google's trailing P/E down to if its aim is true? With $8.74 in trailing earnings by Thursday night, Google's P/E falls to 49. Yes, that would make it cheaper on a trailing P/E basis than Yahoo!.

The future is only going to get kinder. Analysts see Google earning $13.07 next year, with revenues soaring 45% higher to hit $10.3 billion. Over at Yahoo!, the pros see earnings improving to $0.65 a share next year as revenues inch 24% higher to $5.8 billion. In other words, if we go by forward multiples, Yahoo! is trading at 38 times next year's bottom-line results, while Google is fetching just 33 times its 2007 profit target.

More than just P/E envy
Keep in mind that Yahoo! is not a bad company. I like Yahoo! a lot. I just feel that Google's the one with more room for future appreciation. You know all those Wall Street estimates that I have been discussing? The kicker is that Google has managed to trounce quarterly forecasts every single quarter -- save one -- since going public in the summer of 2004. Yahoo!, on the other hand, has to go back four quarters to find the last time it lapped analyst projections.

Google also has the prettier balance sheet. With $9.7 billion in greenery, it's packing $7 billion more than Yahoo!. One can argue that Yahoo! has a more attractive price-to-free-cash-flow or price-to-book ratio, but the goodwill-saddled Yahoo! balance sheet and the capital-intensive growth spurt taking place at Google help downplay those comparative shortcomings.

The market already sees it that way. Yahoo! shares have fallen 27% over the past year while Google stock has climbed 44% higher. Unfortunately, the public is still skeptical. Over on Motley Fool CAPS, your fellow individual investors seem to be rallying around Yahoo!. 86% of the 824 players with an opinion on Yahoo! expect it to outperform the market in the future. On the other hand, just 55% of the Google watchers feel that the stock will appreciate quicker than the S&P 500.

On the surface, it's easy to understand the general skepticism. A lot is riding on Google's dependence on advertising. Even though the same could be said for major networks and many print publishers, Google often gets a bad rap for the relative newness of the platform, instead of the praise the medium deserves for its ability to reach niche audiences and track immediate campaign success levels.

Google is that rare company that even prompted Microsoft (NASDAQ:MSFT) to round up key executives last year and host "The Google Challenge" summit. I really like many of the companies, like Apple (NASDAQ:AAPL), Red Hat (NASDAQ:RHAT), and Yahoo!, that have been thorns in Mr. Softy's side for much longer than Google, but you never saw Microsoft in panic mode over their challenges.

Is that fear? Is that respect? Is that fearful respect? I'm siding with Google on this debate, and it's not as simple as picking the stock that is growing substantially higher and trading at a lower forward earnings multiple. I realize that a lot of the Yahoo! value that is baked into the high multiple is based on some pretty shrewd overseas investments that make it a more dynamic player in overseas markets. That won't pay off for a few more years, so I have no problem with picking up what appear to be pricey shares of Yahoo! today with an investment horizon in the five- to seven-year range. The problem is that, in the near-term, Google has it all over Yahoo!.

Value hunters who feel that Yahoo! is the better deal on an earnings-based basis are going to walk out of this week with a much different perspective than they had when it began.

Disagree with Rick? Agree with him? Motley Fool CAPS is a new community-driven experience where individual investors pool their knowledge to seek out superior stock ideas. Today you can voice your pleasure or displeasure with Rick's assessment by letting your voice be heard. Go ahead and give it a shot .

Yahoo! is a Motley Fool Stock Advisor recommendation. Microsoft is an Inside Value newsletter selection.

Longtime Fool contributor Rick Munarriz is a huge fan of Google, and it would be his home page if it weren't for Fool.com taking up that piece of real estate. He does not own shares in any of the companies in this story. Rick is also part of the Rule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has adisclosure policy.