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Google Inc. Message Board

  • slmoondra slmoondra Mar 19, 2006 9:45 AM Flag

    YHOO vs GOOG: mystery unlocked


    On this Board there has been some posting saying that YHOO is cheaper than GOOG but never supported with any factual data. here is a comparison:

    1. Based on 2005 earnings: YHOO's PE is listed as 23.57, but that includes a one-item special capital gain from their sale of Google stock. If you take that out, then the proforma earnings is $0.58/share or a current PE of 51.84. On the other hand, Google's proforma eranings for 2005 were $5.70 which gives a PE of 59.61. Note, in 2005, revenue growth was 40% for YHOO and 100% for Google.

    2. Based on 2006 earnings: YHOO's proforma earnings for 2006 are estimated as $0.54 which gives a PE of 55.68. For Google, the estimated 2006 proforma earnings is $8.84 which gives a PE of 38.3. YHOO's revenue will grow by 30% in 2006 but GOOG's revenues will grow by 62%.

    3. Based on 2007 earnings: YHOO's proforma earnings for 2007 are estimated as $0.73/share which gives a PE of 41.1. For Google, 2007 proforma earnings are $12.01 which gives the PE of 28.22. YHOO's revenue will grow by 24% in 2007, but Google's revenue will grow by 40%.

    4. For the next 5 years, for YHOO, the projected growth rate is 26% per year and PE is 56. For Google, the average growth rate is projected to be 32.5% per year and PE of 38.4. For S&P500 the average growth rate over the next 5 years is 10% and PE of 15.

    The above data shows that it's erroneous to say that YHOO is cheaper than Google. Google is clearly undervalued relative to YHOO and S&P500 given the growth opportunities.

    This topic is deleted.
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