For investors that can afford it, the time to buy Google (GOOG) is now. In this article, I will explain why shareholders should hold onto this stock as long as possible. Google has made recent moves that could launch its stock price into new highs while taking significant market share from competitors as well. Recent releases and innovations like the Nexus 7, Google + and Google's Compute Engine are taking direct aim at competitors like Facebook (FB), Apple (AAPL) and Amazon (AMZN). Many of these large tech companies are sharing space in increasing competitive markets. I will also highlight how Google is creating distinct advantages that can make it the most dominant force in the tech industry.
Google's sales growth has increased by less than one percent from the previous quarter. Its sales growth has increased by over 24 percent from the previous year. Google's beta is over one while it's PEG ratio is less than one. Its current price is more than 15 times earnings; this is an improvement from the trailing 12 month price of less than 18 times earnings. Google's return on equity has been relatively stable, decreasing marginally since 2011; it's currently at 19 percent. Its operating margin and net margin have increased marginally since 2011, at 27 and 32 percent respectively at the end of Q1 2012. Its current ratio has decreased marginally since 2011 but still remains around 5.8. Google's debt to equity ratio has been stable since 2011 at around .05 at the end of Q1 2012.
Google's growth rate for the past five years was almost three times the industry average while its growth rate for this year is nearly eight times the industry average. Its projected growth rate for next year and the next five years are less than the industry average. Google's price to earnings ratio is around 25 percent of the industry average while its price to book ratio is around 50 percent higher than the industry average. Both the net profit margin and return on equity for the trailing 12 months are significantly higher than the industry average. Growth for Google has slowed lately but its beta and PEG ratio suggest there is still potential in capital appreciation for this internet service tycoon.
Much like its search engine, Google + could be become the standard interaction platform for most people, making Facebook more of a novelty item in the near future. Recently, Google has converted and integrated its Google Places pages into Google + pages. This makes Google + more useful to the public while making it more appealing for commercial customers and marketing than Facebook or Microsoft's (MSFT) Bing. Google converted 80 million Google Places pages into Google+. This makes Google+ useful for social interaction, internet searching and local business searches as well. This creates an effective platform for direct interaction between the customer and business owners through Google.
Google+ is becoming more instrumental in running a successful and lucrative business for most owners. This service enhances engagement and customer feedback for businesses. Google+ is still far behind Facebook in terms of interaction but this creates significant potential for growth. Google+ has greater potential to be a revenue earner for all parties in comparison to Facebook. Users spend an equal 12 minutes on Google+ Stream as they do on the Facebook wall; months ago it was only 9 minutes for Google+ Stream. Facebook has six times as many active users but Google is gaining ground quickly. Google+ also provides a filter and customization for sharing opposed to Facebook's unfiltered and sometimes embarrassing or unabated sharing mechanism.
The recent unveiling of Google's new Nexus 7 tablet creates direct threats in multiple avenues for Apple, Amazon and Microsoft as well. The Nexus 7 will be a comparable price and size to Amazon's Kindle, while providing superior memory, resolution and operating systems. The Nexus 7 comes before Microsoft has perfected its tablet, the Surface, and before Apple has come out with a new iPad to compete in the smaller tablet market. The Nexus 7 will also cost less than the iPad and Surface. The Nexus 7 also features an upgrade of the Android OS to Android 4.1 called Jellybean in anticipation of the Windows 8 release. With its prevalence in multiple smartphones, Android is now the most popular OS on the planet. It can be used by multiple manufacturers unlike Apple's exclusive iOs. Google has created a product superior to Amazon's at the same price. It's undercut the price of Apple's iPads and Microsoft's Surface while upgrading its own widely-used OS. Android OS is open-source, and therefore has greater potential for rapid growth, assimilation and development across multiple platforms. Google already has 50 percent of the smartphone market. Google will dominate if it ever decides to make its own smartphone as it has done with the Nexus 7 tablet.
Google also unveiled its plans for Google Engine Compute in the same week as announcing the Nexus 7 tablet. Google is taking a more focused effort to enter the cloud infrastructure as a service market. It has flirted with the notion through services like Google Apps for some time. Google Engine Compute will directly compete with Amazon's popular Elastic Compute Cloud. Google has expertise in the cloud infrastructure and data service industry; it's essentially the backbone of its business. Google is now focused on monetizing this service for commercial customers. Google believes it has more cost efficient and expansive applications and options to offer in its new "warehouse-scale computing" service. It will take time to take market share from Amazon, but Google will be the most experienced and viable competitor in the industry with enough goodwill and clout to match its expertise in this sector.
Shareholders should hold for an extended period of time while interested investors need to buy Google now. Google is capable of significant capital appreciation in the market as Google+, the Nexus 7 tablet and Google Compute Engine are released and become prevalent in the next few months into 2014. Google has a number of opportunities in the mobile market, and now the tablet and evolving OS market as well. The success of the products will help increase Google's goodwill and potential for success in the future for more its innovative products like the Nexus Q and Google Glasses.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.