If anything, the company may actually be getting too big Google released third-quarter earnings Thursday after the stock market closed, and it was not good news. On an adjusted basis, Google earned $6.35 a share, falling short $6.54 forecast by analysts surveyed by FactSet. Revenue rose to $16.52 billion from $13.75 billion a year earlier. As for Google’s GOOG, -1.04% net income (trailing 12 months), however, it’s been remarkable since the Internet search firm went public, as you can see below. (All charts provided by Capital Market Laboratories.) Google is by far the largest company in its industry (Internet software and services) judging by earnings and revenue. With more granular measures, we can see that Google is no longer an outlier. The chart below illustrates gross margins on the y-axis and earnings from continuing operations margins on the x-axis. Google has narrower margins than BaiduBIDU, +2.67% Alibaba BABA, +3.80% and Facebook FB, -0.79% Here’s what investors are focusing on. 1. Valuation: price to earnings Google’s price-to-earnings ratio has risen 70% since a lull in 2012, and is at its highest level since 2010. A high P/E reveals an expectation of accelerating growth. 2. Ebitda/revenue I’ve noticed a trend in Ebitda/revenue that raises concerns. On a trailing 12-month basis, it’s lower than it has been in a decade. 3. Levered free cash flow per share What hasn’t been discussed broadly is a substantial drop in levered free cash flow per share. That’s acceptable as long as the company creates products and services that can be monetized. But this is yet more pressure on growth forecasts. 4. Research & development/operating expenses R&D has always been a big part of what Google is and how it innovates. The past three quarters, before today’s results, have shown a pickup in R&D expenses. That’s interesting for two reasons: 1. Higher R&D affects the bottom line and operating margins. 2. Higher R&D can yield new product lines or greater efficiencies in traffic-acquisition costs (TAC). In the second quarter, Google reported TAC of 22.9%, the lowest in years. 5. Paid click growth for ‘network’ sites, quarter over quarter Network site advertising revenue represented more than 21% of Google’s total revenue in the second quarter. But paid clicks on those network sites shrank by 5% quarter over quarter. Compare that to 9% growth moving from the first quarter to the second quarter of 2013. So the recent trend hasn’t been good. By OPHIR GOTTLIEB