Google Looks Good Compared to Yahoo

Marketwatch had a good article comparing the stock prices and ratios of Google versus Yahoo.  Their conclusion: Google is undervalued.  It's hard to argue with this conclusion.  In general, Google appears undervalued compared to many of its tech peers.

Google shares are trading at 30 times estimated earnings according to consensus forecasts from Thomson Financial while Yahoo is trading at 50 times earnings.  Google also trades at a 20% discount to the average PE for the Internet sector versus Yahoo's 30% premium.

Google is a huge company that needs enormous growth to maintain its PEs but is any company is capable of doing it, Google is.  They certainly seem to be outmanuevering Yahoo. 

A really bold investor could short Yahoo and go long on Google.  This provides some sector insurance while playing the disparity in the two stocks.

 

Sol Nasisi
Sol Nasisi: Sol Nasisi is the co-founder and a past president of BestCashCow, an online resource for comprehensive bank rate information. In this capacity, he closely followed rate trends for all savings-related and loan products and the impact of rate fluctuations on the economy. He specifically focused on how rates impact consumers' ability to borrow and save. He also has authored a wee

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Comments

  • Trevor Williams

    October 10, 2007

    Google is dismembering Yahoo! Any technology or internet company that says that they are not competing with Google is in for a rude awakening.

  • ZiggiZ

    October 10, 2007

    Yahoo! is the new AOL, and the stock is dramatically overvalued as you have suggested. Google has made a believer out of me too.

  • Dave Weatherspoon

    October 14, 2007

    On a strict valuation basis, you are absolutely correct, but Google is a behemoth as faces slower growth as a result of the law of large numbers.

    http://www.nytimes.com/2007/10/13/technology/13google.html?pagewanted=2&hp&adxnnl=1&adxnnlx=1192295518-CVO5EKBDwClSy1lquBPVzQ

    Google may go higher in the near term, but when, not if, growth slows, it will fall to earth.

    I am not in an way, shape or form advocating Yahoo! as a buy. They've destroyed that one already.

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