The risk-free rate can be determined by using the 10-year Treasury note yield, while the return on the market is more open to opinion. Typically a rate of 10% to 11% is reasonable. The stock's beta can be found on TheStreet.com quote page under the tab "Ratio Comparison."
More than half of Google's price is based solely on the potential for future growth -- perhaps an exaggeration. Google's share of Internet search is more than 80%, so it's difficult to tell where this supposed growth will come from.
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Microsoft, on the other hand, is launching into Internet search with gusto, aiming to take market share from Google. While Microsoft has started to lose ground in its operating system to Apple (Stock Quote: AAPL), it still holds over 85% of that market.
Based on growth priced into the shares, Google looks overvalued. Considering that Google is to search what Microsoft is to operating systems, the big difference between those two is fairly irrational.
TheStreet.com Ratings recently upgraded Microsoft to "buy," driven by a strong balance sheet and solid performance for the stock. Google has a similar rating, but be wary of unreasonable growth expectations heavily influencing its stock price.
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