How will top line and bottom line growth compare with holding onto their high margins?

No doubt when Google reports their earnings in about two weeks we will find that top line sales growth will be wonderful, but something less than last quarter. However, they have extended their R&D efforts, expanded their offerings to include numerous new features, hired more staff, purchased their company headquarters, increased marketing and legal expenses and made many more advances that at least in the short run generate little or no new appreciable revenue. All of these things are worth while pursuits as they mature as a company. Although if they become a "mature" company too fast their stock price will be hard to sustain.

Their current profit margin is running just under 24%, which is great but this may be hard to maintain in light of greater costs to run the enterprise, to say nothing of having to expense stock options. Their wonderful sky high ROE and ROIC will be affected as well.

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Watching Google's margins originally appeared on BloggingStocks on Mon, 03 Jul 2006 11:46:00 EST. Please see our terms for use of feeds.