GOOG Stock Report

2-Year Price History

Ockham’s Rating

GOOG Revenue

As we have often noted, in our valuation methodology, "Cash is King." Well, it goes without saying that if a company cannot produce sales then there is no ability to generate cash flow. By that logic we look very closely at revenue numbers as our second most important factor in valuing a company’s stock. We have established reasonable Price to Sales per share ranges based on historical data of the last 6 years. For, GOOG the high and low end of the Price to Sales per share ratios are 14.07x and 6.96x respectively.

Notice that GOOG’s current Price to Sales per share ratio is 5.99x, which is quite a bit below what we consider a normal Price to Sales ratio for this stock. Given normal conditions and a price of $420.09, GOOG is 44% below where we would expect to see it. This will beneficially factor into our final analysis of GOOG as it is not often that this stock sinks to these levels.

GOOG Cash Earnings

Looking at GOOG specifically in their Cash Earnings capabilities, Ockham views GOOG as significantly below its historical average multiple of Cash Earnings. Looking at the last 6 years we can get a good understanding of what investors have grown to expect from GOOG. For example, GOOG’s Cash Earnings ratio per share has fluctuated between 24.17 and 50.00 over this historical timeframe. This range is based upon a proprietary weighted methodology at Ockham, but can clearly show an investor where GOOG is with respect to prior business periods.

So with GOOG’s current price (latest close of $420.09) and most recent level of Cash Earnings reported, we see significant opportunity from a value perspective. At its current price level, GOOG is 40% below its average level of Price to Cash Earnings on a historical basis. This means that investors were willing to pay for a much higher stock price than currently for the same level of Cash in the past, on a relative basis. There are a couple of important things to remember, however. First, value doesn’t exist in a vacuum. So if the market doesn’t recognize this value, even a great disparity in Price to Cash Earnings cannot force an immediate stock price reaction. Second, patience is key when looking at securities that have reached these levels of Price to Cash Earnings versus their historical norms. So be patient with GOOG.

GOOG Dividends

When determining a company’s future prospects for success, Ockham Research sees analysis of dividend payments as a key additional factor. Even though it isn’t imperative for GOOG to shell out a dividend in order to receive a positive rating, it can be helpful to further our analysis. While we do like to see companies with healthy and growing dividends, it is not appropriate for all companies, especially those focused on growth. In this regard, we regard GOOG as neutral because we do not have historical data for this company’s dividends. We will being incorporating this into our analysis as soon as that data is available.