Google Inc. (GOOG)

Discount cash flow analysis

Sell Overvalued by 33.9%

5% margin of safety What's this?

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How does this work?

This is an interactive analyst report for Google Inc., based on a discounted cash flow valuation approach.

You can modify the assumptions and the valuation will be updated automatically. You can also save and share your valuation.

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Values in $ millions
2007 2008 2009 2010 2011 2012 2013 2014
 
                 
               
 

What will the revenues be in the future?

Growth beyond year three is driven by the terminal growth rate.

Sensitivity matrix

   
-1%
Discount Rate %
0%

1%
  -1% $366.55 $359.91 $353.56
Terminal Growth% 0 $370.02 $363.22 $356.74
  +1% $373.56 $366.62 $359.99

How does a change in discount rate or terminal growth affect valuation?

This table shows the sensitivity of the valuation to two key variables - the discount rate and the terminal growth rate

Valuations and comments

  • Valuecruncher created a new valuation of $302.19 (overvalued by 44.98%) - 18 hours ago
  • XtremeGator created a new valuation of $891.01 (undervalued by 49.63%) - over 4 years ago
  • XtremeGator created a new valuation of $577.98 (overvalued by 2.94%) - over 4 years ago
  • XtremeGator created a new valuation of $713.61 (undervalued by 19.84%) - over 4 years ago
  • XtremeGator created a new valuation of $636.32 (undervalued by 6.86%) - over 4 years ago
  • XtremeGator created a new valuation of $641.59 (undervalued by 7.75%) - over 4 years ago
  • XtremeGator created a new valuation of $772.34 (undervalued by 29.7%) - over 4 years ago
  • XtremeGator created a new valuation of $1508.36 (undervalued by 153.31%) - over 4 years ago
  • XtremeGator created a new valuation of $738.88 (undervalued by 22.48%) - over 4 years ago
  • XtremeGator created a new valuation of $850.90 (undervalued by 41.04%) - over 4 years ago
  • XtremeGator created a new valuation of $910.17 (undervalued by 50.87%) - over 4 years ago
  • XtremeGator created a new valuation of $910.17 (undervalued by 50.87%) - over 4 years ago
  • XtremeGator created a new valuation of $1037.49 (undervalued by 71.97%) - over 4 years ago
  • XtremeGator created a new valuation of $1084.84 (undervalued by 79.82%) - over 4 years ago
  • XtremeGator created a new valuation of $956.12 (undervalued by 58.48%) - over 4 years ago
  • XtremeGator created a new valuation of $723.92 (undervalued by 20.0%) - over 4 years ago
  • XtremeGator created a new valuation of $1073.62 (undervalued by 77.96%) - over 4 years ago
  • XtremeGator created a new valuation of $1449.61 (undervalued by 140.28%) - over 4 years ago
  • ab747x created a new valuation of $947.29 (undervalued by 53.14%) - over 4 years ago
  • GordonGekko created a new valuation of $583.84 (undervalued by 14.94%) - over 4 years ago
  • SethWellbourne created a new valuation of $414.38 (overvalued by 26.82%) - over 4 years ago
  • GordonGekko created a new valuation of $589.34 (undervalued by 7.15%) - over 4 years ago
  • GordonGekko created a new valuation of $542.07 (overvalued by 7.73%) - over 4 years ago
  • sundjn created a new valuation of $402.92 (overvalued by 30.5%) - over 4 years ago
  • kuangxiaohui created a new valuation of $456.49 (overvalued by 19.91%) - over 5 years ago
  • ensayofr created a new valuation of $232.04 (overvalued by 57.97%) - over 5 years ago
  • ensayofr created a new valuation of $270.60 (overvalued by 50.99%) - over 5 years ago
  • mobajwa created a new valuation of $456.35 (undervalued by 3.0%) - over 5 years ago
  • GordonGekko created a new valuation of $448.59 (undervalued by 3.92%) - over 5 years ago
  • tekne created a new valuation of $558.16 (undervalued by 39.93%) - over 5 years ago
  • tekne created a new valuation of $312.92 (overvalued by 21.55%) - over 5 years ago
  • Lespe959 created a new valuation of $412.53 (undervalued by 3.42%) - over 5 years ago
  • GordonGekko created a new valuation of $412.09 (undervalued by 2.14%) - over 5 years ago
  • SethWellbourne created a new valuation of $392.92 (undervalued by 3.0%) - over 5 years ago
  • SethWellbourne created a new valuation of $521.71 (undervalued by 52.24%) - over 5 years ago
  • rthwrm created a new valuation of $370.11 (undervalued by 12.1%) - over 5 years ago
  • mlongval created a new valuation of $370.11 (undervalued by 12.1%) - over 5 years ago
  • GordonGekko created a new valuation of $369.98 (undervalued by 12.06%) - over 5 years ago
  • GordonGekko created a new valuation of $369.64 (undervalued by 16.27%) - over 5 years ago
  • rs12345 created a new valuation of $253.99 (overvalued by 16.9%) - over 5 years ago
  • rs12345 created a new valuation of $283.27 (overvalued by 7.32%) - over 5 years ago
  • nzvikram created a new valuation of $616.76 (undervalued by 74.67%) - over 5 years ago
  • tiger created a new valuation of $279.25 (overvalued by 0.06%) - over 5 years ago
  • rjbullock created a new valuation of $260.06 (overvalued by 0.9%) - over 6 years ago
  • dweis created a new valuation of $273.41 (overvalued by 8.07%) - over 6 years ago
  • KiwiEMH created a new valuation of $318.88 (undervalued by 2.86%) - over 6 years ago
  • anoop249 created a new valuation of $472.63 (undervalued by 26.87%) - over 6 years ago
  • TheCrunchBlog created a new valuation of $416.73 (undervalued by 22.87%) - over 6 years ago
  • KiwiEMH created a new valuation of $337.31 (undervalued by 1.6%) - over 6 years ago
  • TheCrunchBlog created a new valuation of $352.67 (overvalued by 7.44%) - over 6 years ago
  • TheCrunchBlog created a new valuation of $304.96 (overvalued by 29.25%) - over 6 years ago
  • TheCrunchBlog created a new valuation of $493.88 (undervalued by 9.96%) - over 6 years ago
  • GordonGekko created a new valuation of $438.65 (undervalued by 5.91%) - over 6 years ago
  • veter created a new valuation of $175.18 (overvalued by 58.29%) - over 6 years ago
  • KiwiEMH created a new valuation of $479.36 (overvalued by 0.78%) - over 6 years ago
  • GordonGekko created a new valuation of $606.64 (undervalued by 9.3%) - over 6 years ago
  • Sam created a new valuation of $473.45 (overvalued by 14.69%) - over 6 years ago
  • MarkC created a new valuation of $528.69 (overvalued by 4.74%) - over 6 years ago
  • andrew created a new valuation of $260.15 (overvalued by 54.61%) - over 6 years ago
  • benkepes created a new valuation of $346.02 (overvalued by 39.96%) - over 6 years ago
  • acoy created a new valuation of $487.70 (overvalued by 16.06%) - over 6 years ago
  • andrew created a new valuation of $285.51 (overvalued by 47.58%) - over 6 years ago
  • TheCrunchBlog created a new valuation of $481.94 (overvalued by 11.13%) - over 6 years ago
  • TheCrunchBlog created a new valuation of $590.39 (undervalued by 8.87%) - over 6 years ago
  • TheCrunchBlog created a new valuation of $363.22 (overvalued by 33.02%) - over 6 years ago
  • TheCrunchBlog created a new valuation of $507.85 (overvalued by 6.35%) - over 6 years ago
  • sthapit created a new valuation of $456.39 (overvalued by 15.84%) - over 6 years ago
  • GordonGekko created a new valuation of $1038.75 (undervalued by 97.32%) - over 6 years ago
  • TheCrunchBlog created a new valuation of $1038.75 (undervalued by 97.32%) - over 6 years ago
  • ffarin created a new valuation of $476.03 (overvalued by 9.57%) - over 6 years ago
  • matrixxx created a new valuation of $220.11 (overvalued by 54.74%) - over 6 years ago
  • DART created a new valuation of $223.63 (overvalued by 55.51%) - over 6 years ago

Comments

A scenario approach to valuing Google - Disruption

This valuation is part of this blog post:

http://blog.valuecruncher.com/2008/06/a-scenario-approach-to-valuing-google-goog/

2. Disruption – where Google’s current market dominance is reduced by changes in the competitive landscape. This scenario holds all the inputs from the base case constant except that we have decreased the terminal growth to 5.5% – based on 2011 growth of 15% decreasing to 4% over ten years – and dropped EBITDA margins to 37.5%. This scenario has a valuation of US$363.22 per share. This is 33.0% below the current share price and 24.6% below our base case valuation.

By TheCrunchBlog, over 6 years ago

The boring details

All amounts in millions Figures
Enterprise Value: 158,290
Net Debt (Long-term borrowings less cash): -14,218
Equity Value: 170,332
Number of Shares Outstanding: 314,000,000
Calculated value per share: $363.22

Enterprise Value is the present value of the post-tax cash flows for a business into the future.


Calcuation of EV

Where:

  • C1, C2, C3 - the cash flow in period 1, 2, 3, ...
  • r - the discount rate

To capture the cash flows into the future a terminal value is calculated via a perpetuity calculation -
based on the final years forecast post-tax free cash flow.


Perpetuity

Where:

  • Cn - the cash flow in the final forecast period.
  • LTG - the long-term growth rate
  • r - the discount rate
  • g - the terminal growth rate

The Capital Asset Pricing Model (CAPM) is used to determine the equity component in the discount rate.


CAPM model

Where:

  • rt - the risk free rate
  • t - the tax rate
  • B - the beta of the company
  • MRP - the Market Risk Premium

Valuecruncher uses an estimate of Weighted Average Cost of Capital (WACC) to determine the discount rate in the calculation.