Google 2011 4Q financial analysis

Companies revenue shows stable growth. 4Q revenue grew by +25% from 8,4 bn.$ to 10,6 bn.$. But because operating expenses grew even more Net income before Depreciation grew a bit less by +10% from 2,9 bn.$ to 3,2 bn.$. but as can seen at the chart below last past quarter generated Net income before Depreciation became flat on 3,2 bn.$/quarter level even when revenue continues to increase. This could indicate that company net income growth could be on hold, but further quarter results will show. Anyway Google remains the No.1. place on the internet to search for something. Market share in search engine stays ~80%. In general companies results are positive.

Companies balance sheet is strong. Equity level ranges up to 80%. Liabilities are minimal, and due to that all other ratios are also good. Except ROE which is around 20%, but for such high equity level its quit good.

Company does not own any inventories. Account receivables are a bit increased up to 6,4 bn.$. but stays along with revenue growth. Its turnover ~60 days is normal. As can seen from chart below companies generated Net income is mainly used for short term investments which increased from  21 bn.$ Q4 2010 to 35 bn.$ Q4 2011. Also investments into long term asset were quit active. In total company invested over 5 bn.$ at Y2011. Positive cash flow from equity change is continues as company continues to draw money from the market. In total 2 bn.$ at Y2011.

As announced at 2011-08-15 Google has sealed a deal to buy Motorola for 12,5 bn.$. This transaction is not yet in its balance, company is fully able to pay them from its 45 bn.$ shot term investment+cash reserves, but this investment looks a bit overvalued as it was paid 40$/share almost twice as companies market share value. As Motorola figures show things was not very good for the company. It generated net  loss in last 3 years (Y2011 -0,249 bn.$). Decrease of sales in US market from 7,4 bn.$ to 6,8 bn.$ total revenue to be increased only by sales in Brasil and China. Hopefully synergy with Google mobile Android technology will create more value in that. In general companies balance structure is strong.

 

Share value:

Common Stocks	20,3 bn.$	0,325 bn.	62,5 $
+ Retained earnings	37,6 bn.$	+ 115,7 $	178,2 $
+ 1 year Net income before Depreciation	11,6 bn.$	+ 35,7 $	213,9 $

 

Companies share basic value is ~178$.  Current market price is 616$ which shows that market is paying 438$ more or 12,3 years of Net income before Depreciation earnings. Share profitability (share market price/Net income before Depreciation) is 6%.

Company at the moment does not pays dividends and as large investment into Motorola is underway no dividends is projected in the near future as well.

Analysis source: Google 2011 4Q 10-Q financial statements

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