Just found an interesting piece comparing the red hot Chicago Mercantile Exchange Holdings (ticker: CME) to Google’s explosive stock price.
…Chicago Mercantile Exchange Holdings (CME), now trading at $435.25, more than 12 times its IPO price from December 2002. The price is at the same high altitude as GOOG, and people understandably wonder if there’s a kind of dot-com fever infecting both issues. ….
Profit margin: 31.4 percent for CME, 23.9 percent for GOOG; return on equity, 31.8 percent for CME, 23.8 percent for GOOG; forward estimated price/earnings ratio: 32 for CME, 28.8 for GOOG. GOOG’s revenue growth is greater, but CME has less competition. And both balance sheets have piles of cash with no debt.
CME, though, has one clear advantage over GOOG. Its progress is transparent. With more than 70 percent of its revenue coming from trading fees, all an investor has to do is check the daily volume reports. GOOG has been criticized for not being forthcoming about revenue sources. With CME, its an earnings “surprise” only if you haven’t been paying attention.
Interesting point about that transparency…
Google’s search volume should be pretty easy to work out, i wrote the following for our own blog about how analysts should be able to work out Google’s revenue numbers. The method won’t be quite as transparant as looking at trading numbers, but shouldn’t be too far off.
Last year Google launched a Budget Optimiser that automatically worked out how best to spend a defined budget over a 30 day period. You could also use it to give an indication of what level of traffic you buy at a given CPC. When we enabled it, we doubled the amount of traffic we were able to buy overnight. At the time I thought to myself that if we doubled our spend, it was quite likely that a lot of other companies would have done the same…
The following Quarterly results were beyond analysts expectations, this made me think that with a stock like Google it should not be too difficult to work out what their results are likely to be, ahead of time. I started to think that perhaps even with a small PPC account combined with other free data a reasonable guesstimate of their results would be possible.
Alexa provides fairly accurate data as to how Google is doing compared to its competitors in terms of page impressions, users and reach. If Google release something that has a meaningful effect on the CPCs that their customers pay or on the volume of searches that they are able to do, it is blogged to death and is major news.
With this data I believe that analysts should be able to do some clever modelling that will tell them how the results will pan out. I believe that this should also be true of shopping sites like amazon too.
Sceptics would doubtless argue that because of fixed and variable costs, this cannot be true. The thing is if Google gets a big partnership with a major portal, a little research and a few user tests should be able to tell what percentage of clicks are going through their links. Furthermore, published accounts give an insight into the percentage that Google and other pay out to their partners, again the results will be predictable.
Pop that little lot together and some very accurate predictions should be possible, with which some good bets must be possible….
It boggles the mind …. doesn’t it.
Thanks of the heads up.
You are Abe Frohman?
There is a web based stock prediction at http://www.magicta.com. CME, GOOG, and 8000 other stocks are predicted. They post the prediction error and technical analysis graphs