Lately I have heard a lot of talk about Google's stock price hitting $500. I think this makes for an interesting lesson on valuing stocks. You see there is some method to the madness of putting a value on a stock. It is not about the stocks price at all really, it is about how much return you get on your investment.
So here is a few examples of stocks that outperformed Google. First of all vdsi, Vasco data securities. If you would have invested $1000 in both Google stock and Vasco stock, the Vasco investment would be worth a cool $4963.50 a (496 percent gain) compared to Google's at $3,662.50 (362 percent gain) since Google's initial public offering (IPO). Sure a lot of people don't know about vdsi, but what about Apple computer AAPL? That $1,000 would have been $4,950, I mean everyone knows about Apple computer, but no one talks about the massive gains there since 8-27-04. Please remember that the price of one share of a company doesn't really mean anything in the end, it is more about the P/E ratio and return on investment! There is no difference in a stock going from $5 dollars to $10 and a stock going from $500 to $1,000, think about that when you think that $500 is a lot to pay for one share of a company.
You can learn more about Google here.