"You gotta roll with it
You gotta take your time
You gotta say what you say
Don't let anybody get in your way"
-- "Roll With It," by Oasis, from the 1995 album (What's The Story) Morning Glory
Google
What Fools say:
Here's how Big G's CAPS rating stacks up against some of its peers and competitors:
Market Cap (Billions) |
Trailing P/E Ratio |
CAPS Rating (out of 5) |
|
---|---|---|---|
Microsoft |
$269.4 |
16.5 |
*** |
|
$142.1 |
34.1 |
*** |
Time Warner |
$51.2 |
12.3 |
*** |
Yahoo! |
$37.8 |
60.02 |
** |
IAC |
$5.6 |
N/A |
*** |
Our CAPS players like Google more as a long-term investment than as a short-term trade. The company has a commanding lead in the online search and advertising markets that are nearest and dearest to its heart, and the stock has been punished quite severely this year.
Of course, some still think that Google's stock is overpriced, and others worry that high-profile Google managers who are leaving to start new ventures will bring serious competition someday soon.
What management does:
The online business has always brought rich margins. But although margins have been somewhat stable across the board, keep your eye on Google's growing free cash flow.
9/06 |
12/06 |
3/07 |
6/07 |
9/07 |
12/07 |
|
---|---|---|---|---|---|---|
Gross |
60.1% |
60.2% |
60.1% |
60.1% |
60.1% |
59.9% |
Operating |
33.8% |
33.8% |
33.6% |
32.4% |
31.7% |
30.7% |
Net |
26% |
29% |
29% |
27.5% |
26.9% |
25.3% |
FCF/Revenue |
16.6% |
15.8% |
15.2% |
17.4% |
19.4% |
20.3% |
Growth (YOY) |
9/06 |
12/06 |
3/07 |
6/07 |
9/07 |
12/07 |
---|---|---|---|---|---|---|
Revenue |
77.5% |
72.8% |
68.4% |
63.6% |
60.7% |
56.5% |
Earnings |
86.5% |
110% |
106.5% |
78.6% |
66.5% |
36.6% |
One Fool says:
My reasons for owning Google stock are simple: The company is untouchable in its areas of core competence, and it's working on applying the lessons learned online to other business opportunities. Google is about to start auctioning off TV commercial spots much the same way it handles AdWords and online advertising. And early trial feedback suggests that the new model is simpler and more effective than traditional TV ad-buying procedures. Grabbing even a small slice of the $66 billion market of North American TV advertising will boost Google's already considerable cash-generating powers.
Any bumps in the road toward that vision are mere buying opportunities to me. As such, I'm sort of hoping for bad news tomorrow night, because my portfolio could use a few more Googly shares.
But given Google's positioning in the market and innovative attitude, I wouldn't be surprised if the quarter is nothing but gold.