Is It Finally Time To Short Google?

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Yes, says Fortune's Geoff Colvin. Sure, there have been people claiming Google has hit the ceiling during almost every phase of Google's unprecedented value creation ascent, but Colvin swears that Google is bound for a tumble. The reason - Google can't keep investing capital at 13% and getting 53% returns, a spread better than 99% of the Russell 3000. Google has only invested about $9 billion of capital so far but is experiencing diminishing returns, from 111% four years ago, to 82% the year after, to 53% in the last four quarters.
Colvin looks at Google's implied future economic value added (EVA, or the dollar amount by which return on capital exceeds the cost of capital) in relation to its current share price. His argument:

To live up to the expectations embedded in its current share price, Google would have to increase its EVA, which was $2.4 billion for the past four quarters, by $2 billion annually this year, next year, and every year into the future - forever. So Google's EVA next year would have to be $4.4 billion; in five years it would have to be $12.4 billion, and so on.
That's what investors are counting on when they buy Google at today's price. Are they being realistic? No, they're not. To hit that EVA target, Google would have to invest $5.1 billion every year at its recent knockout return of 52.5 percent (assuming its capital cost doesn't vary much). But you can't invest $5.1 billion every year at 52.5 percent.

Google (Nasdaq: GOOG) is down almost a half a percent in daily trading.
Don't go gaga over Google [Fortune via CNN Money]

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