Consistent strong performance by Google over the years, and remarkable growth in its stock price

Google Inc. is a worldwide technology company that designs and offers various products and services. The Company is primarily focused on web-based search and display advertising and tools, desktop and mobile operating systems, enterprise solutions, consumer content, commerce, and hardware products.

Spectacular set of numbers; on a growth flight

Google posted a spectacular set of numbers in the fiscal year ending December 2013 with total revenues of $59.8 billion, a growth of 19% year-on-year. However, the company’s operating income grew by only 9% in fiscal year 2013 due to higher cost of goods in fiscal year 2013 (cost of goods sold as a % of total revenues in fiscal year 2013 stood at 37% versus 34% in fiscal year 2012).

This has led to decline in operating profit margin to 23.3% in fiscal year 2013 as compared to 25.4% witnessed in fiscal year 2012. However, at the net income level, the company was able to maintain the growth pretty much in line with the revenues largely led by lower effective tax ratio. The company posted net income of $12.92 billion for the fiscal year 2013, registering a growth of 20%. Likewise, for the quarter ended June 2014, revenues grew by 22% and operating income grew by 23% on a year-on-year basis.

Net income came in at $3.42 billion for the quarter ended June 2014 as compared to $3.23 billion for the corresponding quarter last year, registering a growth of only 6%, as this was primarily driven by higher share of profits from discontinued operations in the quarter ended June 2013.

Remarkable increase in EPS, however retains profit to meet expansion plans

Google locked in an EPS of $38.82 in fiscal year 2013, registering a meaningful growth of 18%. However, Google Inc. is a non-dividend paying company and ploughs back the entire profit into the business for expansion and capex plans.

Market consensus

Market consensus signals that the company is expected to expand its base going forward across all parameters viz., revenue, net income and EPS. So the company is likely to sustain its growth momentum and deliver decent results in the times to come. However, with respect to the dividend payment, the company is predicted to maintain the status-quo and will not announce dividends in the light of future expansion plans. Following table showcases market expectations for Google:


Robust capital structure

Company’s long term debt stood at $2.2 billion as of December 2013 which is miniscule as compared to the equity base of $87.3bn, implying a Long-Term Debt to Equity ratio of only 3%. Company’s capital structure is very healthy considering very low debt, ever-increasing equity base coupled with strong return ratios.

Upcoming events

The Company is expected to 1) announce its 3rd quarterly results between 15 October 2014 to 20 October 2014, and 2) conduct Annual Shareholders Meeting between 14 May 2015 to 18 May 2015.

Major shareholders

Following are 3 major shareholders of company:

  • Fidelity Management & Research Company 6.99% holding with 19.80m shares
  • The Vanguard Group, Inc. 5.12% holding with 14.52m shares
  • BlackRock Institutional Trust Company, N.A. 3.77% holding with 10.69m shares

    Significant change in shareholding

    Following are the major shareholding transactions that took place recently:

  • State Street Global Advisors (US) selling 11.04 million shares

    Structural growth in stock price of Google Inc., reflecting its robust financial performance over the years