It has been less than two months since Google Inc (NASDAQ:GOOG) reported its fourth-quarter earnings. Since then the company’s shares have soared almost 20% to reach an all-time high. Google Inc (NASDAQ:GOOG)’s fourth-quarter performance was promising. The company very definitely surprised the Street with its reported revenue. Its fourth-quarter revenue of almost $14.5 billion surpassed projected revenues by more than $2 billion. This was a 36% growth from the previous year, and a 8% quarter-over-quarter growth. The company reached $50 billion in revenue for the first time in 2012. It also produced an impressive 12% EPS growth.
Google Inc (NASDAQ:GOOG) definitely has very high ambitions. The company has moved into smartphones and tablets through mobile OS development, expanded into web browser development, and most recently has forayed into hardware. But I believe the shares are still undervalued. Since the company is progressively transforming into a technology conglomerate, its stock should trade at a much higher valuation multiple than other big-tech stocks.
Currently, Google Inc (NASDAQ:GOOG) is on the verge of breaking yet another 52-week high. With a price target of more than $850, it is no surprise that shareholders and future investors all have their attention focused on Google. There is strong, widespread support for investing in the company. However, we need to compare it to competitors such as Apple Inc. (NASDAQ:AAPL) and Microsoft Corporation (NASDAQ:MSFT), to see if Google Inc (NASDAQ:GOOG) is a more secure and viable investment alternative.
The best of the three giants
While the aforementioned companies are not directly comparable, we can draw some insight by evaluating the differences in P/E ratio. Google Inc (NASDAQ:GOOG)’s P/E ratio of around 25 can imply that either it’s expecting strong future earnings growth or it’s overvalued. Judging from the company’s growing international expansion and implementation of several innovative strategies to maintain leading market share, I feel it is the former. The forecasted sales and earnings growth rate estimates speak for themselves — it still trades at a low PEG ratio of 1.2.
Although Apple Inc. (NASDAQ:AAPL) currently still has the highest EPS of the three companies, they’re predicted by some analysts to have negative earnings growth this fiscal year. This definitely is a red flag when considering a long-term investment. Apple captured a once in a lifetime opportunity with the iPhone, which led to an era of explosive earnings growth. Apple Inc. (NASDAQ:AAPL) has had its share of success, but now if it doesn’t renovate its business model, it could fall behind Google and Microsoft Corporation (NASDAQ:MSFT).