Google (NASDAQ:GOOG) was one of the hottest stocks back in 2009 when its growth rates were up there, but now has become more of an afterthought as it has matured. It seems like investors are overlooking the company now as it is undervalued on all of the valuation metrics despite still solid growth rates.
Recent news for the company includes closing the acquisition of Motorola Mobility Holdings. The acquisition will enable Google to supercharge the Android ecosystem and will enhance competition in mobile computing. Motorola Mobility will remain a licensee of Android and Android will remain open. Google will run Motorola Mobility as a separate business. Sanjay Jha, who revived Motorola's Mobile Devices business and led the company through this acquisition, has stepped down as CEO, although he will continue to work with Google to help ensure a smooth transition. Dennis Woodside, who has overseen integration planning for the acquisition and previously served as President of Google's Americas region, has become CEO of Motorola Mobility. Below is an in depth look at the valuation metrics and stock chart.
Valuation: Google's trailing five-year valuation metrics suggest that the stock is undervalued as all of the metrics are below their respective five-year averages. Google's current P/B ratio is 3.2 and it has averaged 4.9 over the past five years, with a high of 9.5 and low of 3. Google's current P/S ratio is 5 and it has averaged 7.1 over the past five years, with a high of 13 and low of 4.4. Google's current P/E ratio is 18.2 and it has averaged 28 over the past five years, with a high of 52 and low of 17.6.
Price Target: The consensus price target for the analysts who follow Google is $747. That is upside of 24% from today's stock price of $600.8 and suggests that the stock has room to run from these levels.
Forward Valuation: Google is currently trading at about $601 a share with analysts expecting EPS of $50.44 next year, an earnings increase of 16% year over year, for a forward P/E ratio of 11.9. Taking a look at the company's publicly traded comparisons will give us a better idea of the stock's relative valuation. Baidu (NASDAQ:BIDU) is currently trading at about $119 a share with analysts expecting EPS of $6.41 next year, an earnings increase of 39% year over year, for a forward P/E ratio of 18.6. Yahoo (NASDAQ:YHOO) is currently trading at about $15 a share with analysts expecting EPS of $1.09 next year, an earnings increase of 15% year over year, for a forward P/E ratio of 14. AOL (NYSE:AOL) is currently trading at about $27 a share with analysts expecting EPS of $0.85 next year, an earnings increase of 15% year over year, for a forward P/E ratio of 32. The mean forward P/E of Google's competitors is 21.5, which suggests that Google is undervalued relative to its publicly traded competitors.
Earnings Estimates: Google has beat EPS estimates three times in the past four quarters. The company's EPS figures have come in between -100 cents and 98 cents from consensus estimates or about -9.5% to 11.3% from analyst estimates. The company has reported earnings that have differed from analyst estimates by a wide margin, which suggests that the stock may experience upside from earnings surprises.
Price Action: Google is up 15.61% over the past year, outperforming the S&P 500, which is up 2.2%. Looking at the technicals, the stock is currently below its 50-day moving average, which sits at $621.14 and above its 200 day moving average, which sits at $593.11.
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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.