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loanuniverse




msg:1234551
 11:50 pm on Jul 31, 2004 (gmt 0)

As an investor, I have not put money in an internet based company for a while {I kind of learned a harsh lesson in 2000}. Therefore, I have not even followed the PE multiples that some of these companies command. Somehow, I had an idea that they were really high, but today when I looked at YHOO to get an idea of whether or not the Google offering was out of whack, I was surprised to see that its PE was over 100.

I thought “hey maybe this Google IPO” is not really too expensive. Let me run some numbers and see what it comes out to…


FindWhat 3-Sep3-Dec4-Mar4-JunLast 4 Qtrs
EPS Actual $ 0.12 $ 0.15 $ 0.16 $ 0.15 $ 0.58
Price per share $ 16.30
PE rolling 4 Qtrs 28.10

Yahoo 3-Sep3-Dec4-Mar4-JunLast 4 Qtrs
EPS Actual$0.05$0.06$0.07$0.08 $ 0.26
Price per share $ 30.80
PE rolling 4 Qtrs 118.46

Microsoft 3-Sep3-Dec4-Mar4-JunLast 4 Qtrs
EPS Actual$0.30$0.34$0.34$0.28 $ 1.26
Price per share $ 28.49
PE rolling 4 Qtrs 22.61

Google 3-Sep3-Dec4-Mar4-JunLast 4 Qtrs
EPS Actual$0.00$0.18$0.00$0.54 $ 0.72
Price per share $ 108.00
PE rolling 4 Qtrs 150.00

Google 3-Sep3-Dec4-Mar4-JunLast 4 Qtrs
EPS Actual$0.00$0.18$0.00$0.54 $ 0.72
Price per share $ 135.00
PE rolling 4 Qtrs 187.50

Now talking only numbers, once you take into account revenue and most importantly earnings growth for Yahoo and Google, the numbers are at least comparable. You take a look at the analysts projections for Yahoo’s earnings per share for 2005 and the consensus is about a 25% increase. Most people would agree that Google will at least double that growth rate.

Now this is super simplistic and does not take into account the certainty of the future cash flow, the fact that Google is way less diversified than Yahoo, and a bunch of other stuff one can think of.

Just wanted to throw in my 2 cents because I thought it was interesting.

P.S: Price and earnings information from Yahoo Finance Date: 7/31/04

 

bnhall




msg:1234552
 1:40 am on Aug 3, 2004 (gmt 0)

So Google is possibly going to be valued at the same or higher PE than Yahoo.

That's why I'm short the QQQ.

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