Alphabet Inc (GOOGL, Financial) has recently been in the spotlight, drawing interest from investors and financial analysts due to its robust financial stance. With shares currently priced at $168.47, Alphabet Inc has witnessed a daily loss of 1.4%, marked against a three-month change of -6.12%. A thorough analysis, underlined by the GF Score, suggests that Alphabet Inc is well-positioned for substantial growth in the near future.
Understanding the GF Score
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
- Financial strength rank: 10/10
- Profitability rank: 10/10
- Growth rank: 10/10
- GF Value rank: 7/10
- Momentum rank: 7/10
Each one of these components is ranked and the ranks also have positive correlation with the long term performances of stocks. The GF score is calculated using the five key aspects of analysis. Through backtesting, we know that each of these key aspects has a different impact on the stock price performance. Thus, they are weighted differently when calculating the total score. GuruFocus assigned Alphabet Inc the GF Score of 98 out of 100, which signals the highest outperformance potential.
Alphabet Inc: A Snapshot of Business Operations
Alphabet Inc, with a market cap of $2,050,455.62 billion and sales amounting to $359,713 million, is a holding company that wholly owns internet giant Google. The California-based company derives slightly less than 90% of its revenue from Google services, the vast majority of which is advertising sales. Alongside online ads, Google services houses sales stemming from Google's subscription services (YouTube TV, YouTube Music among others), platforms (sales and in-app purchases on Play Store), and devices (Chromebooks, Pixel smartphones, and smart home products such as Chromecast). Google's cloud computing platform, or GCP, accounts for roughly 10% of Alphabet's revenue with the firm's investments in up-and-coming technologies such as self-driving cars (Waymo), health (Verily), and internet access (Google Fiber) making up the rest.
Financial Strength: A Pillar of Stability
According to the Financial Strength rating, Alphabet Inc's robust balance sheet exhibits resilience against financial volatility, reflecting prudent management of capital structure. The Interest Coverage ratio for Alphabet Inc stands impressively at 565.02, underscoring its strong capability to cover its interest obligations. This robust financial position resonates with the wisdom of legendary investor Benjamin Graham, who favored companies with an interest coverage ratio of at least 5.
With an Altman Z-Score of 12.09, Alphabet Inc exhibits a strong defense against financial distress, highlighting its robust financial stability. With a favorable Debt-to-Revenue ratio of 0.07, Alphabet Inc's strategic handling of debt solidifies its financial health.
Profitability: A Testament to Operational Efficiency
The Profitability Rank shows Alphabet Inc's impressive standing among its peers in generating profit. Alphabet Inc's Operating Margin has increased (42.17%) over the past five years, as shown by the following data: 2020: 22.59; 2021: 30.55; 2022: 26.46; 2023: 27.42; 2024: 32.11.
Furthermore, Alphabet's Gross Margin has seen a consistent rise over the past five years, as evidenced by the data: 2020: 53.58; 2021: 56.94; 2022: 55.38; 2023: 56.63; 2024: 58.20. This trend underscores the company's growing proficiency in transforming revenue into profit. The Piotroski F-Score confirms Alphabet Inc's solid financial situation based on Joseph Piotroski's nine-point scale, which measures a company's profitability, funding, and operating efficiency. Alphabet Inc's strong Predictability Rank of 5.0 stars out of five underscores its consistent operational performance, providing investors with increased confidence.
Growth: A Commitment to Expansion
Ranked highly in Growth, Alphabet Inc demonstrates a strong commitment to expanding its business. The company's 3-Year Revenue Growth Rate is 13.9%, which outperforms better than 72.42% of 533 companies in the Interactive Media industry.
Moreover, Alphabet Inc has seen a robust increase in its earnings before interest, taxes, depreciation, and amortization (EBITDA) over the past few years. Specifically, the three-year growth rate stands at 12.5, and the rate over the past five years is 21.6. This trend accentuates the company's continued capability to drive growth.
Conclusion: Alphabet Inc's Path to Market Leadership
Alphabet Inc's financial strength, profitability, and growth metrics, as highlighted by the GF Score, underscore the firm's unparalleled position for potential outperformance. The company's strategic initiatives, robust financial health, and commitment to innovation position it as a formidable player in the market. As investors seek opportunities for growth and stability, Alphabet Inc's comprehensive financial profile makes it a compelling choice. For those interested in exploring more companies with strong GF Scores, GuruFocus Premium members can utilize the following screener link: GF Score Screen.
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.
