
Google: Strong company, inflated stock price - gibsonf1
http://money.cnn.com/magazines/fortune/fortune_archive/2007/08/06/100141308/index.htm?postversion=2007072403
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byrneseyeview
"Here's what it found: To live up to the expectations embedded in its current
share price, Google would have to increase its EVA, which was $2.4 billion for
the past four quarters, by $2 billion annually this year, next year, and every
year into the future - forever. So Google's EVA next year would have to be
$4.4 billion; in five years it would have to be $12.4 billion, and so on."

That's one way to look at it, but that's assuming that it's going to grow
earnings linearly, rather than exponentially. Google isn't growing linearly,
and they haven't in the past (look at their record from 2002 on: $99,656,
$105,648, $399,119, $1,465,397, $3,077,446). Under no circumstances would one
thing that the best fit here is linear growth.

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dpapathanasiou
Good quote:

 _the info-based economy just doesn't require that much capital, so investing
mammoth sums almost always leads to lower, not higher, returns._

Something to keep in mind when discussing valuations and raising capital.

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byrneseyeview
Er. He may be talking about diseconomies of scale (it's harder to get a high
return invest $1 billion than investing $1 million), which would be nothing
new. Or he's claiming absolutely lower returns (earning $5 million on a $10
million investment versus earning $2 million on a $20 million investment), in
which case he's almost always wrong.

There are a small number of cases where a startup would have lasted longer if
they'd raised less -- but there's still a pretty strong correlation between
having lots of capital and getting a high absolute return.

