One thing that's been bothering me about GOOG valuations lately is the big disparity between the various EPS (earnings per share) numbers. My concern is that valuations are based on a fuzzy version of EPS that has nothing to do with the real EPS.
For Q3, analysts were expecting $0.56. GOOG came in at $0.19. Without the one-time charges from the Yahoo settlement, it would have been $0.45. An analyst on the call somehow arrived at $0.75. Yahoo is showing that they did $0.70 [finance.yahoo.com].
Yahoo is now showing that the average EPS estimate for 2004 is $2.53 [finance.yahoo.com], with $0.76 in Q4. Q1-Q3, according to Google, was $0.73 ($0.24+$0.30+$0.19). According to Yahoo, it was $1.81 ($0.53+$0.58+$0.70).
Yahoo is showing the average EPS estimate for 2005 as $3.40. With 275 million shares, that's nearly a billion dollars in profit. If Google does 5 billion in sales in 2005 (which I think is a high, but doable estimate), that's a 20% profit margin. Google's profit margin is about half of that.
My own estimates put GOOG's EPS at about $5 to $6 in about 5 years, but the analyst's fuzzy EPS numbers put them relatively close to that next year. I think a $2 EPS is much more realistic next year.
These high estimates from the analysts and fuzzy EPS numbers could send GOOG into the ground over the next year as Google "disappoints" by missing the fuzzy numbers.
Am I missing something?