• Read Write Web, Thursday, July 10, 2008 11:45 AM

Read Write Web takes a long hard look at the financials of the seven biggest Internet stocks (excluding AOL) and 20 mid-tier players and determines that there is no Internet bubble. Using Yahoo Finance data, RWW's Bernard Lunn posts each company's market capitalization, price earnings growth, revenue growth in the last 12 months, cash, and 52-week change in stock price. He finds that the top seven Internet companies-Microsoft, Google, Cisco, eBay, Yahoo, Amazon and Adobe-have an average PEG of 1.4.

PEG is widely used as an indicator of a stock's potential value. The lower the PEG, the more undervalued the stock, and 1.4 is pretty low. Nothing "bubbly" there, Lunn says. His second post focuses on the middle 20 Web tech stocks, which are publicly traded companies with a market cap of over $1 billion. Lunn finds that more than half of the middle 20 have a PEG below 1.0, which he says "tends to signal 'bargain opportunity' to investors." This leads to the conclusion that there is no bubble in public Internet stocks. However, private valuations (for the likes of Facebook and Twitter) are a completely different story, and one that can't be told because the public can't access their financial information.

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