Security Analysis and Valuation.
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Security Analysis and Valuation.

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Valuation of Google (GOOG) Stock Price.

Valuation of Google (GOOG) Stock Price.

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Security Analysis and Valuation. Security Analysis and Valuation. Presentation Transcript

  • KEPLER INC. Equity Research Report – Google Inc.
  • Kepler Inc. Jitto David.
  • Company Background:
    • Google Inc is an Information technology company .
    • Google is world's largest search engine.
    • Google Inc company started with seed money of $100,000 from Angel investors.
    • Google Inc filed incorporation on 4th September 1998 in California, U.S.
    • Google two main source of revenue Google AdSense for Web Site Services and Google AdWords for advertisers.
  • Google Services.
    • Google. com for search and personalization,
    • Google Image Search,
    • Google Book Search,
    • YouTube,
    • Google Scholar,
    • Google Blog Search,
    • Google Webmaster Tools,
    • Google Toolbar,
    • Gmail, Google Talk,
    • Orkut,
    • Picasa Web Albums,
    • Google Finance,
    • Google Docs,
    • Google Calendar,
    • Google Translate,
    • Google Earth,
    • Google Mobile,
    • Google Friend Connect,
    • Google News Archive,
    • Gmail Labs,
    • Google Maps,
    • Google Search Appliance,
    • Google Mini and Google Search Appliance products for small and medium sized businesses.
  • Management:
    • Eric Schmidt – Chairman of the Board and Chief Executive Officer .
    • Larry Page - Co-Founder & President, Products .
    • Sergey Brin - Co-Founder & President, Technology .
    • Nikesh Arora - President, EMEA Operations & Senior Vice President.
  • Key Innovation :
    • Developed a new kind of server setup.
    • Page Rank Technology .
    • Hypertext-Matching Analysis .
    • Result: In faster response times, greater scalability and lower costs in operating.
  • Life of a Google Query:
  • Google Inc.
    • Listed on Nasdaq and component of Nasdaq 100 TECH Sector Index (NDXT).
    • Constituent of S&P 100 and AMEX Internet .
    • Google Inc (GOOG).
    • First Initial Public Offering of 19,605,052 shares of Class A common stock.
    • Opening price: $85 per share.
    • Current market capitalization 134.541Billion (15/04/2009) .
  • Last 5 Years:
  • Google Inc.
    • Key Financial Facts – 31 st December 2008
    • Revenue - $21.795 Billion
    • Gross Profits - $13.174 Billion
    • Net Income - $4.227 Billion
    • Total Assets - $31.767 Billion
    • Total Equity - $28.239 Billion
    • Total Cash & Cash Eq. - $15.846 Billion
  • Market Share:
  • Market Share Pie Chart:
  • Four Methods of Valuations.
    • 1.Dividend discount Model.
    • 2.Discounted cash flow Model.
    • 3.Residual Earnings Model.
    • 4.Abnormal Earnings Growth Model.
  • Why Residual Earnings Model?
    • No dividend payment – Dividend discount model not useful.
    • Discounted Cash Flow model – No consideration for value generated that doesn’t involve cash flows.
    • Discounted Cash Flow model – No consideration for accrual accounting.
    • Abnormal Earnings Growth model – Doesn’t give insight into drivers of growth.
    • Residual Earnings model – Focuses on growth & investments and Incorporates Accounting statements rather than CF statements.
    • Residual Earnings model – Forecasts can be validated in subsequent financial statements.
  • Reformulated Balance Sheets.
  • Reformulated Income Statements.
  • Ratios.
  • Common Size analysis of Income Statement:
  • Common Size analysis of Balance Sheets.
  • Trend Analysis of Income Statements.
  • Trend Analysis of Balance Sheets.
  • Valuation Essentials.
  • Simple Forecasting.
  • Forecasting Ratios.
  • Forecasted Performance.
  • Recommendation
    • Calculated value per share is $ 426.96
    • Market value per share $ 379.50 (April 15, 2009)
    • Market value per share as on 31 st Dec 2008 was $ 307.65
    • Market value per share as on 27 th April 2009 was $ 385.20
    • On the basis of our evaluation we strongly recommend to buy Google stock.
  • Recommendation
    • In order to support our recommendation, we reproduce analysts’ recommendations from www.nasdaq.com
    • Any Questions …. ?