Pity the poor Google (Nasdaq: GOOG) investor. We've seen the stock do a sideways crabwalk over the past one, two, and five years, even as the business improved by leaps and bounds:

  Change From 2010 Change From 2009 Change From 2006
Revenue

25%

41%

336%

EPS

17%

88%

340%

Operating Cash Flow

21%

40%

324%

Share Price

0%

21%

29%

Data from Capital IQ, a division of Standard & Poor's, reflecting TTM results and recent closing prices as of 6/16 in the relevant years.

Seems a little unfair, doesn't it? Google shares have gained a meager 29% over the past five years, for a whopping 5% annual return, while sales, earnings, and cash flows all more than quadrupled. Some compression of multiples is normal for any growth stock as it matures -- I mean, we shouldn't expect Google to trade at 65 times trailing earnings the way Baidu (Nasdaq: BIDU) does, because the Chinese rival is still in its high-growth phase in a rapidly expanding and virginal home market. But still, this is an extreme example of great results not matching investment returns.

It seems obvious to me that Google is undervalued today, and Wall Street agrees: 35 analyst firms currently have a buy rating on Google stock, versus five holds and not a single seller, according to Thomson/Reuters. The average one-year target price sits at $700, or 40% above current prices.

So what gives? How could Google dispel the doubters and unlock the value that's stored in its shares? I have two ideas.

Explain where all the money is going
Nobody's perfect; one of Google's flaws is a rather opaque operating model.

The company works as a single monolithic business segment, named Global Internet Search Solutions. Into this bucket goes everything: search-related revenues, sales from ad networks not related to search, mobile and multimedia results from properties like Android and YouTube -- you name it, it's in there.

Management is reluctant to break results out in any further detail. Instead, you get cryptic and nearly meaningless statements like these in, say, the year-end earnings call of 2010:

  • "YouTube revenue more than doubled."
  • "Mobile search grew 4 times on Mobile devices for Web browsers in the last year."
  • "Our AdSense revenue was up 22% year over year to $2.5 billion." (Wow, was that so hard to disclose?)

I'd love to see Google sharing its results in greater detail, the way it does with the AdSense ad network. That would help investors get a handle on where the company is going, what the road map looks like, and how those efforts are working out.

For now, we're reduced to listening to analysts and independent market researchers who tell us how Android phones are stacking up against the Apple (Nasdaq: AAPL) iPhone or Research In Motion's (Nasdaq: RIMM) BlackBerry, and then we can sort of guess how it affects Google itself.

The YouTube acquisition has gotten miles and miles of bad press because nobody knows whether it's making any money. Revenue doubled to what level, exactly, in 2010? How much of that amount trickled down to operating income -- or losses? And so that deal still looks like a $1.7 billion dollar-bill bonfire to many investors. I think they're wrong, but nobody really knows. Why not come out and tell us?

It's somewhat of a Foolish mantra: Greater transparency is better for investors. In this case, I think it's better for the stock as well. And it wouldn't cost a thing to get this done.

Get social -- slowly
It's not that Google hasn't tried its hand at social networking -- it's just that those efforts don't seem to stick.

Socialites such as Groupon, LinkedIn (Nasdaq: LNKD), and, soon enough, Facebook are invading the markets at fanciful valuations relative to unproven and/or ineffective business models. Their grand entrances haven't moved Google shares at all, which tells me that investors don't see Big G competing in the same space. But it needs to.

Search and advertising services form a fine platform for Google from which to launch personalized services. Some pop, like Gmail. Others don't, like Orkut, Google Wave, and Buzz.

Gmail stole email market share from incumbents Yahoo! (Nasdaq: YHOO), AOL (NYSE: AOL), and others -- not because it was just different and Google-branded, but because it was better and introduced in a sneakily viral campaign. Now it's a vital part of Google's push into business-grade services and more personalized and efficient advertising.

Slapping consumers across the face with Wave and Buzz services they never asked for didn't work at all, especially when Google trampled all over privacy concerns in the process. Do less of that and more of the Gmail-style slow introduction, and maybe you'll have another hit on your hands. Case in point: Android got off to a torpid start but has now become the leading smartphone platform in the world -- one inconsequential handset model at a time.

Sometimes slower is better.

Is that all?
There are many other potential catalysts at Google's disposal, from getting cozy with regulators here and abroad to grabbing a serious foothold in TV programming or music distribution. But my two suggestions are at the top of my wish list, and both are well within the company's reach. In fact, the transparency thing should be mandatory.

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Fool contributor Anders Bylund owns shares of Google, but he holds no other position in any company mentioned here. See his holdings and a short bio. The Motley Fool owns shares of Google, Yahoo!, and Apple. Motley Fool newsletter services have recommended buying shares of Yahoo!, Baidu, Apple, and Google, as well as creating a bull call spread position in Apple. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.