October 31st, 2007
Much is made of round numbers. And so there will be some discussion today of Google’s stock hitting $700 a share.
That big-sounding number itself, of course, is testament to nothing more than the company’s founders’ insistence on not splitting its stock. It does show that Google’s value has increased more than eight times since its initial public offering three years ago.
But the most interesting number is Google’s market capitalization — the value of all of its shares combined. Henry Blodget of Silicon Alley Insider does a little fast fingering to calculate that with the $20 jump in Google’s stock in the last two days, its market value is now about $217 billion. That ranks it the fifth most valuable company in the country.
Most valuable are Exxon Mobil, General Electric, Microsoft, and AT&T. Google has now become worth more than Procter & Gamble, Bank of America and Citigroup. Google of course is a lot smaller than the companies it passed. P&G, for example, has nearly eight times the revenue and three times the profit of Google. But of course Google is growing far, far faster.
Mr. Blodget calls Google’s price-to-earnings ratio of 55 “not preposterous.” What has been amazing to watch is that investors keep bidding up the share price and the company responds by earning so much money as to bring each new dream back into the not-preposterous range.