There has been a tremendous dislocation in the price of this stock. Momentum traders have beaten this up. All the analcysts compare the pe ratio of GOOG to YHOO and conclude that GOOG is trading at a much cheaper pe and YHOO's pe of 45 to 1 is unjustifiable given its growth and prospect. What they fail to mention is the free cash flow. That metric is simply the organic cash generation of any company. U must strip out all the 1 time items and the non cash items like stock comp expense. And the results are shocking. the FCF of YHOO is about 1.5 billion and that of GOOG is 2.5 billion. Does that 1 billion difference justify GOOG trading at more than 5 times YHOO. I proffer that the market cap to FCF ratio is relatively very cheap...19/1.....bottom line MSFT Knows how cheap this company is and they know they better jump on IT now be4 YHOO turns the corner and the cheap buying opportunity will be gone. An investor actually has to read a company's filings and do some homework as opposed to complain about a P/E (which is among the most useless metrics out there). Earnings are the easiest thing to manipulate; cash flow, on the other hand has to tie. Take a closer look at Yahoo's balance sheet and you'll see: $2B in net liquid assets (cash+equivalents+receivables-debt-payables) ~$7-8B stake in Yahoo Japan ~$2-4B stake in Alibaba (depending on how conservative the valuation is, etc.) Now, add these up and you get Yahoo has $11-14B in net liquid assets on the balance sheet. Yahoo's market cap was $30B before today. Subtract these out (because they do not contribute to cash flow) and you get $16 B valuation for Yahoo's core business. Yahoo (excluding the aforementioned assets) will generate $2B in EBITDA in 2007. So, you are paying x8 EV/EBITDA multiple which is ridiculous for a large, non-capital intensive, highly liquid company. For comparison, this is a cheaper multiple than Google and even print media (newspapers have declining top line and shrinking margins). Also, recent internet acquisitions have been going for x20-25 EBITDA, just to put the valuation in perspective. If Yahoo's EBITDA increases to $2.3B in 2008 (average Street estimate, probably overoptimistic), you are paying x7 multiple. Simple math, as I said.