The value of Google
Everyone talks about Google. So I had a closer look and compared valuations of Google to its peers, and also to our peers. What I found was interesting.
Everyone talks about their stock price, which is now higher than ever at $347/share! But the more interesting story is their market cap, P/E ratio, and valuation multiple compared to other companies we know and love...
Valuation, $B Revenue, $B/yr Multiple P/E
Google 97 5.3 18x 102
Yahoo 50 4.8 10x 33
Microsoft 268 39.4 7x 22
SAP 54 10.3 5x 33
Intergraph 1.4 0.56 2x 16
Matrikon 0.1 0.05 2x 24
AspenTech 0.3 0.27 1x -ve
Market pricing is set by demand and expectation, so one can see that the market does not expect much from Aspen – assigning a total market cap (company value) of only 1x revenue. Similarly, not too much excitement is built in to the market valuations of Matrikon and Intergraph, both of which are valued at only 2x revenue.
The real gold lies in the valuations assigned to Google & Yahoo – whose valuations are the reward for bringing innovation to market.
The challenge for companies like PAS then, is to lead with innovative product strategies that deliver solid and significant customer value. Products and solutions that can change the industry - not just deliver more of the same.
And it’s exactly that challenge on which the PAS team is going to deliver…
Cool blog. I didn't know PAS employs philosophers. Google is overvalued with a PE of 100...for every $1 of net income that google earns, investors are willing to pay $100 in stock. I agree with comments on innovation.
Posted by:Alan Hedengren | November 10, 2005 at 08:30 PM