Google Inc (GOOG): How Much Growth Can We Expect?

Valuation
Of course, Google probably won’t cease to exist in 10 years. So we’ll need a perpetuity rate to estimate the annualized growth beyond Year 10. To be conservative, we’ll use 3% — equal to the historical rate of inflation.

Finally, we’ll discount these future cash flows by a 10% discount rate. The result? Google shares are worth $927. At this value, Google is trading at a 6% margin of safety — leaving almost no breathing room for error. But if you’re very confident in Google’s economic moat, you may be willing to use a 5% perpetuity rate. In this case, Google’s worth $1,160 per share, trading at a 25% margin of safety. Though a 25% margin of safety isn’t enough to persuade the typical value investor to throw down on a tech stock, it might be enough for investors who are very bullish on Google.

What do you think?
Google definitely isn’t the screaming buy it was, but it isn’t a sell, either — at least not for investors with Foolishly long time horizons. Whether the stock is a buy or not is highly dependent on your view of the company’s competitive advantage.

I’d love to know what you think in the comments below. Is Google a buy? Or is it a hold after its recent run-up?

The article Google Stock: Is It Time to Sell? originally appeared on Fool.com.

Fool contributor Daniel Sparks has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Facebook and Google.

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