I appreciate my dueling partner Anders Bylund's love for Google (NASDAQ:GOOG). There's only one small problem -- valuation. Let's take his numbers for Google's potential, significantly dial back R&D costs, and run a valuation on it to see what we can see:

Total Market


Google's Potential Share


Google's Possible Revenue


Gross Margin


Gross Profit


SG&A as % revenue


R&D @ half of SG&A


Operating Income


Tax Rate


Net Income


(Dollar values in billions)

The CIA Fact Book put the world's GDP at official exchange rates at $43.07 trillion in 2005. Of that, the U.S. had $12.49 trillion, or 29%. We'll assume that Google can penetrate global markets as completely and profitably as the U.S. With that generous assumption, Google's global potential profitability might reach as high as $17.63 billion a year. Once a company matures, though, growth slows to the level of the overall market. Anders mentioned "inflation" as that rate of growth -- over time, about 3%.

Plugging those numbers into the Gordon Growth Model for an investor who wants an 11% return would give Google a potential terminal value as high as $220.39 billion. That's what it could be worth someday, if it manages to profitably capture 15% of the total global advertising market. Right now, as I write this, Google's market cap is $147.52 billion -- 67% of its theoretical total terminal value. Yet its actual delivered profits were a mere 13.7% of where they might reach if Google dominates the world.

In other words, Google is currently priced as if it already dominates the global online and offline advertising world. It doesn't. Therefore, it's dramatically overpriced. There are plenty of companies you can own to profit in the stock market. Google doesn't look like one of them.

Think you're done with the Duel? Think again! Go back and read the other three entries, then vote for the winner!

At the time of publication, Fool contributor and Inside Value team member Chuck Saletta did not own shares of Google. The Fool has a disclosure policy.