There is a tale involving a tin of fish that economists use to illustrate the valuation of assets. It is perhaps the world’s only shaggy sardine story, and goes (sitting comfortably?) like this.

"Once upon a time, a trader bought a tin of sardines for $1 and sold them to a rival for $1.50. This trader in turn sold them for $2" and so on and so forth. Years pass, "until chancing upon a man willing to pay $10. The buyer, who was famished, opened the tin only to find that the sardines were inedible. ‘But you don’t understand,’ the vendor said. ‘These were trading sardines, not eating sardines’." That’s it.

The moral of the story is that assets are worth, ultimately, what someone is prepared to pay for them, and that price may be a poor reflection of their real value.

Such thoughts will comfort the many sceptics who warned that Google shares when they were floated at $85 last August were dangerously overvalued. The price represented some 200 times the company's 2003 earnings. Didn’t investors learn from the collapse of the dot.com bubble?

If they did, what investors appreciated was that an impoverishing fall in stock prices is typically preceded by an enriching rise. What comes down must have gone up in the first place.

Google’s shares doubled by November and had added a further 20 per cent by the close of trade last night.

This before the release of the results which showed the company’s revenues near doubling and its profits rising by more than five times.

Yet do the contents of the Google tin remain good eating?

Reasons for real hope in the virtual world were trumpeted on Tuesday by Yahoo, Google’s closest rival. Terry Semel, the Yahoo chief executive and chairman, said: "We are on the cusp of witnessing a significant increase in engagement of consumers on the internet."

Today, Sir Martin Sorrell, the chief executive of WPP, stated just why that results in higher advertising revenues. "The continually increasing cost in network television, the fragmentation of media and the development of new technologies are all moving the market toward direct, interactive and internet."

In Britain, spending on internet ads has already overtaken that directed at commercial radio, a PricewaterhouseCoopers survey revealed earlier this month.

The question is when such growth will slow, and Google shares will approach a sell-by date. There are some signs of it, even in the latest figures.

Revenue growth of 93 per cent is impressive, but lower than the 117 per cent reported for last year, 233 per cent in 2003 and 409 per cent in 2004.

The profits growth of 576 per cent is astounding, but flattered by a tax rate of 19 per cent - one-third of that which applied last year. Indeed, Google paid less tax this time than it did a year ago. Over the rest of the year, a tax rate of nearer 30 per cent will apply.

Nonetheless, Google is likely to record enough profits growth to keep its shares smelling fresh. The challenge to their continued rise is likely only to come when the limits of the virtual world are established and investors can value the territory Google has conquered. It is for investors to estimate when Google might stumble upon boundaries to its growth.

One day Google will become a Ford or General Motors. For now, it is fairly ranked as a highly rated growth stock. And how do you value one of them? Well, once upon a time, a trader bought a tin of sardines...

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