the_nerd - 8:52 am on Oct 1, 2008 (gmt 0)

Google actually closed at $381.00 with a P/E of 25.03. The average U.S. equity P/E ratio from 1900 to 2005 is 14. Google = overpriced stock.

P/E isn't the only variable to assess the value of a stock. If earnings grow by 35% per year, a P/E of 25 means "dirt cheap". Do the math: if the growth is sustainable after 5 years the P/E will stand at 7.8 (if the stock doesn't move) - or the stock will have doubled or more in the meantime.

If earnings don't grow or even shrink in the years to come .... some more air might come out of the stock.

It's hard to tell who's right, so let's wait and see :-)