Google Stock Stuck in Neutral
05/03/07 - 06:43 AM EDT
Vishesh Kumar
As a company, Google(GOOG Quote - Cramer on GOOG - Stock Picks) prides itself on doing things differently. But when it comes to its stock, Google should be embarrassed about its conspicuousness.
Taking into account its expected rate of growth, Google's stock price multiple is trading at a steep discount. And as the company has continued to deliver stronger earnings -- while its shares remain stagnant -- this compressed ratio has only become more glaring. Shares of Google closed trading Wednesday at $465.78, near levels they first saw in January 2006. Back then, the company reported quarterly adjusted earnings of $1.54 a share. In its latest quarter this year, Google announced earnings per share of $3.68 -- almost two and a half times as much. However, all the major indices -- the S&P 500, Dow Jones Industrial Average, and the Nasdaq -- have outpaced Google shares over that period. Google's price to earnings to growth ratio, meanwhile, is only 1.1 -- the lowest by a wide margin for a big-cap Internet stock. Indeed, the second-lowest -- eBay(EBAY Quote - Cramer on EBAY - Stock Picks) -- has a PEG of 1.26, and that's despite widespread investor concerns that eBay's core auction platform is aging and the avenue for future growth is anything but certain. It's not just that Google is simply bigger than eBay to begin with, either. Microsoft(MSFT Quote - Cramer on MSFT - Stock Picks), at $290 billion and nearly twice the market cap of Google, still commands a PEG ratio of 1.5. Even with repeated failures to make a dent in the online ad business -- and amid growing fears about its future growth -- Microsoft's stock has outpaced Google over the last year. While you wouldn't know it by looking at the stock's recent performance, Google continues to be the darling of Wall Street analysts and investors alike.
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