Google Inc. (NASDAQ:GOOG) left its search engine competitors in the dust when it decided to focus on technological innovation. The company has become one of the most important and technological firms around, competing with industry juggernauts like Apple Inc. (NASDAQ:AAPL) and Facebook (NASDAQ:FB). The growth has created a barrier of entry for some investors, with the stock currently trading near $600. So is now a good time to buy in?
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Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
H = High Quality Pipeline – Google’s Android technology has been causing them lots of legal problems lately but has also made them extremely competitive in the technology space. As more and more devices adopt Android technology, revenues will likely grow as well. The company is also pushing the integration of its technology and social networking with continued efforts to promote Google + technology. With Google’s wealth of data about users across a variety of applications, the company has a real opportunity to turn major profits.
E = Equity to Debt Ratio is 4.84 – Google’s long-term debt has grown along with the company. Its debt to equity ratio is nearly half the industry average of 8.31, and while the ratio is not exactly a big fat zero as we like to see, the company is also sitting on a healthy pile of excess cash.
E = Earnings Per Share Have For the Most Part Increased Since 2010 – With the exception of a drop during the first quarter of 2011, Google’s earnings have been increasing quarter-over-quarter. Earnings for the first quarter of 2012 were $8.75, up from $5.51 the prior year and $6.06 in 2010.
E = Excellent Relative Performance to Peers – Google’s one-year performance is nothing to sneeze at. In the past 52 weeks, the company has seen 15.8 percent returns, outpacing both the industry and the S&P 500. While, the returns are impressive, Google still falls behind Apple, which has seen 52 week returns of 58.6 percent.
T = Trends Show the Industry is Growing – Like it or not, the wave of technology innovation is not going anywhere. And Google happens to be at the forefront of innovation. In a society that’s always on the hunt for the next big innovation, Google — along with its main competitor Apple Inc. (NASDAQ:AAPL) — are well positioned.
Conclusion: Google Inc. is a solid company with decent growth potential and lots of available cash. Earlier this year, the company rewarded investors with a one-time dividend. While there are no promises of a repeat in the future, it showed management is willing to pass the profits to shareholders going forward.
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