Google Inc (NASDAQ:GOOG) is obviously one of those mega companies that just dominates its industry and is the undisputed search king. However, what does this mean for investors who are considering an investment into Google? It is our contention that although Google is a fairly safe investment, it has had its day for now and is not offering growth and value for investors who seek this.[Trend Analysis]
Google (NASDAQ:GOOG) looks to no longer be a solid performing investment option for investors for the 4 following reasons:
Google is currently trading at a price to earnings ratio of 34.7x, which is higher than the tech industry average of 32.4x and considerably higher than the market average of 19.5x. This obviously means that the current stock price of GOOG just doesn’t provide value for investors at present.
Although analysts are predicting significant future growth for Google going forward in earnings, we need to understand that this growth is not coming from the top line (i.e. revenue). These growths are predicted in profit and this is not expected to translate into significant cash flow growth either. This all means that potentially not a high proportion of this growth will flow back to the investors.
Google makes a significant profit, earnings near $15 billion financial last year. Still income investors will not see any of this yet as GOOG does not distribute a dividend.
All in all Google Inc (NASDAQ:GOOG) just doesn’t offer significant prospects for the 3 major types of investors based on current estimates for the company. Although a healthy company with large cash reserves, little debt and good cash flows, an investment in Google just does not look likely to generate significant return or alpha for investors seeking such and perhaps money would be better invested elsewhere. Of course if one has differing projections to the market for Google and their current R&D pipeline, then this should certainly be taken into account.