Google Inc (GOOG), Baidu.com, Inc. (BIDU): Facebook Inc (FB), Is It Ahead of Itself?

One important difference between Google Inc (NASDAQ:GOOG) and Baidu.com, Inc. (ADR) (NASDAQ:BIDU) is that Baidu offers higher growth prospects. China is still a developing nation; the number of online users is growing 20% year over year, and there is room for more growth as only 44% of China is currently online.

Conclusion

Facebook Inc (NASDAQ:FB) is a valuable company with a tight grip on the social networking world. Regardless, the company’s profit margin is driven down by the fact that there are a number of properties that offer similar brand advertising opportunities. With a price to earnings (P/E) ratio around 175, a price to sales (P/S) ratio around 15 and a profit margin of 9.1%, Facebook is just too expensive.

For now, Google Inc (NASDAQ:GOOG) or Baidu.com, Inc. (ADR) (NASDAQ:BIDU) are better options. Google trades at a P/S ratio around 5 with a return on investment (ROI) of 14.4% and a profit margin of 21.0%. Google’s control of the search engine market is holding steady, and its margins should stay the same in the coming years.

Baidu.com, Inc. (ADR) (NASDAQ:BIDU)’s valuation is higher than Google Inc (NASDAQ:GOOG)’s with a P/S ratio around 11, but it compensates with a higher ROI of 25.4% and a profit margin of 39.9%. As the Chinese market matures it is expected that Baidu’s margins will fall to be in line with Google’s, but China’s growing Internet population makes Baidu’s higher valuation justifiable.