Alphabet Inc (GOOGL, Financial) recently exhibited a daily gain of 1.24%, complemented by a 3-month gain of 3.44%. With an Earnings Per Share (EPS) of $5.21, investors are keen to understand whether the stock is fairly valued. This article delves into the intricacies of Alphabet's valuation, providing a clear analysis for investors. Continue reading for an in-depth assessment of Alphabet's market value.
Company Introduction
Alphabet Inc (GOOGL, Financial), the parent company of the internet media giant Google, is a dominant force in the online advertising space, with Google accounting for 99% of its revenue. The company's diverse revenue streams also include app and content sales on Google Play and YouTube, cloud service fees, and hardware sales from products like Chromebooks, Pixel smartphones, and smart home devices. Alphabet's "other bets" segment is where it invests in cutting-edge technology for health, internet access, autonomous driving, and more. As we compare Alphabet's current stock price of $138.34 to the GF Value of $143.9, we set the stage for a comprehensive valuation analysis.
Summarize GF Value
The GF Value is a unique measure that determines the intrinsic value of a stock, taking into account historical trading multiples, a GuruFocus adjustment factor for past performance and growth, and future business performance estimates. According to this method, Alphabet (GOOGL, Financial) is considered fairly valued, with the market cap sitting at $1.70 trillion. The GF Value Line suggests that the stock's long-term return should align closely with its business growth rate.
Financial Strength
Investors seeking to avoid permanent capital loss must assess a company's financial strength. Alphabet's cash-to-debt ratio of 4.13 places it in the middle of the pack within the Interactive Media industry. Nonetheless, Alphabet's overall financial strength is formidable, with a score of 9 out of 10, highlighting the robustness of its financial position.
Profitability and Growth
Alphabet has maintained a stellar track record of profitability, with an impressive operating margin of 26.51%, outperforming 88.25% of its peers in the Interactive Media industry. The company's profitability rank is a perfect 10 out of 10. In terms of growth, Alphabet's 3-year average revenue growth rate surpasses 72.39% of its industry counterparts, and its EBITDA growth rate of 21.8% is also noteworthy.
ROIC vs WACC
An insightful way to evaluate Alphabet's profitability is by comparing its Return on Invested Capital (ROIC) against its Weighted Average Cost of Capital (WACC). Alphabet's ROIC of 28.57 significantly outpaces its WACC of 10.82, indicating the company's ability to create value for shareholders.
Conclusion
In conclusion, Alphabet (GOOGL, Financial) is deemed to be fairly valued, with robust financial health and strong profitability. Its growth prospects are promising, outshining many within the Interactive Media industry. For a deeper understanding of Alphabet's financial journey, one can explore its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
