Oogling Google (GOOG)

 

Google (GOOG), the Internet mogul, has dropped in price some 44% in the last six months and 25% in the last three, as of today December 10th. Between my two SSGs, GOOG’s price fell a whopping 54%. 

 

Does anyone ogle Google?  Maybe now is a good time to buy this stock?

 

Here’s a comparison of three analyses, my prior and updated SSGs as well as a recent one by AnnC.

 

Google (GOOG)	AnnC	Armin-1	Armin-2
Date	11-28-08	5-21-08	11-21-08
Data	S&P	S&P	same
Price	$292.96	$565.76	$262.43 (down 54%)
52 week High & Low Price	$724.80 & $247.30	$747.24 & $412.11	$724.80 & $247.30
Project Growth From	Last Quarter	Last Quarter	same
Sales Growth	15.0%	n/a	18.00%
EPS Growth	10.2% (see 1 below)	25.00%	12.00% (see 2 below)
High PE	26.0	30.0	same
High EPS	$25.78	n/a	$28.00
High Price	$630.30 (140/sh or 18% < VL’s low end)	$1302.50	$840.00
Value Line Estimated High Price = $770- 1150 as of 11-21-08 and $925-1385 as of 5-23-08
Low PE	12.0	14.6	same
Low EPS	$15.89	n/a	$15.89
Low Price	$190.70 (Low PE x Low EPS)	$207.80 (Low PE x Low EPS)	$148.40 (60% x 52 week low)
Upside/Down	3.7	2.1	5.1
Total Return	18.0%	18.2%	26.2%
SSG Buy Under	n/a	n/a	$321.30
RV/PRV (outliers out)		n/a	37.8/33.8 (2 yrs out)
RV/PRV (no outs)	33.0/30.0	n/a	29.6/26.4
Quality	n/a	n/a	Not Rated
PTPM – 5 yr ave	32.0% trend up	32.0% trend up	same
ROE – 5 yr ave End Equity	17.6% trend up	17.6% trend up	same
ROE – 5 yr ave Start Equity	n/a	n/a	38.1 trend down
Debt to Equity – 5 yr ave	n/a	n/a	-0- trend even

 

(1) Ann’s 10.2% estimated EPS growth came from her Preferred Procedure which involves making four estimates for the 5 next years.  Hers were: Sales @ 15.00%, PTPM @ 32.0% (5 yr historical ave), Tax @ 33.0% (VL’s estimate), & Shares @ 350M (VL’s estimate) = 10.2% EPS.

 

Ann’s starting point of 15% Sales growth is low.  Here’s why: (A) As to be expected, historical growth is trending down at GOOG, but it is still very high and well above Ann’s estimates: for the last 3 years, growth was 73.2% Sales & 90.1% EPS; last 2 yrs was 64.4% Sales & 58.9% EPS, and last year was 56.5% Sales & 34.1% EPS.  (B) In addition, GOOG’s Sustainable Growth Rate is 34.3%, the rate it could grow without borrowing, and Zacks currently is estimating growth for the next 5 years at 67.08% Sales and 28.13% EPS.

 

(C) Value Line does not make an explicit estimate of long-term Sales growth, but does estimate Sales per share at 22.0%.  Moreover, two Sales growth rates also can be implied from VL data: 24.78% (VL’s method) and 26.13% (traditional method).

 

(D) All these growth rates indicate that Ann started low by estimating 15.00% future Sales growth and ended low by estimating 10.2% EPS growth.

 

(2) Still another grounds on which to evaluate Anne’s SSG is what the analysts are estimating.  When I updated my SSG on 11-21, the six analysts I checked were estimating long-term EPS growth at an average of 22.5% with S&P low at 18.70% and Zacks high at 28.13%.  FactSet CallStreet via CNN Money was 19.00%, First Call via Yahoo Finance was 20.78%, VL was 23.00%, and Reuters via Morningstar was 25.2%.

 

FactSet’s 19.00% estimate was from 10 analysts who ranged from a high of 50.0% to a low of 14.0%.

 

(3) In a down market, I think it is appropriate for our Forecast High Prices to be close to the low end of Value Line’s estimated High Price.  Ann’s was 18% or $140 per share lower than the low end of VL’s estimate which is not close and which is one reason why she did not get a SSG Buy while I did. 

 (4) However, I have no confidence in my SSG as many of my judgments are blind guesses, especially the Forecast Low Price where I used 60% its 52 week low.  I know of no guidance that tells me if that guess is good or bad.

 

How low it will go in this recessionary period is anybody’s guess???

 

– Armin