If you think Google (GOOG) is overvalued, take a look at Yahoo (YHOO)

Google (GOOG) came within $0.15 of $500 per share today, but ended up closing at 491.93. Per Yahoo Finance, Google's trailing P/E is a breathtaking 62.47. However, when you look at analysts projected growth of earnings from $10.29 a share in 2006 to $13.68 a share in 2007, it's price starts to make sense - forward P/E is "only" 35.96. Revenue will grow from 7.24B to 10.66B - over 47%. P/E numbers like that make sense when coupled with consistent growth; earnings outgrow the price as growth tapers off and the P/E falls into line with the market.

Yahoo (YHOO) is also growing, but not as fast. It closed today at $27.15. Revenue this year is estimated at 4.55B, next year 5.47B - a growth rate of only 20%. Trailing P/E is only 34.41, but forward P/E is 45.25 - higher than Google! In 2006, Google revenues will be 1.6 times Yahoo's. In 2007, it will be 1.95.

In other words:

1) Google is bigger
2) Google makes more money
3) Google is growing faster
4) Google shares are cheaper for 2007 earnings

I don't believe Yahoo has any strategies in the pipeline to drastically increase it's growth. Instead, Google is pretty much eating Yahoo's lunch. If Google's high price is unjustified, Yahoo's high price is a bad joke.