Shares of Alphabet (GOOG) Are on Sale - But Consider the Risk.

Alphabet shares moved -38.8% over the last 52 weeks, with a high of $152.1 and a low of $83.45. During this time, the stock lagged the S&P 500 index by -18.9%. As of January 2022, the company's 50-day average price is $94.2472. Alphabet Inc. provides various products and platforms in the United States, Europe, the Middle East, Africa, the Asia-Pacific, Canada, and Latin America. The large-cap Communication Services company has 186,779 full time employees and is based in Mountain View, CA. Alphabet has not offered any dividends in the last year.

Growing Revenues With a Flat Capital Expenditure Trend:

2019-12-31 2020-12-31 2021-12-31
Revenue (MM) $161,857 $182,527 $257,637
Revenue Growth n/a 12.77% 41.15%
Gross Margins 55.6% 53.6% 56.9%
Gross Margins Growth n/a -3.6% 6.16%
Operating Margins 22.2% 22.6% 30.6%
Operating Margins Growth n/a 1.8% 35.4%
Earnings Per Share $2.46 $2.93 $5.61
EPS Growth n/a 19.22% 91.43%
Free Cash Flow (MM) $30,972 $42,843 $67,012
FCF Growth n/a 38.33% 56.41%
Capital Expenditures (MM) -$23,548 -$22,281 -$24,640
Net Debt / EBITDA -0.27 -0.19 -0.06

A Lower P/E Ratio Than Its Sector Average but Trades Above Its Graham Number:

Compared to the Communication Services sector's average of 18.65, Alphabet has a trailing twelve month price to earnings (P/E) ratio of 17.2 and, based on its EPS guidance of 5.22, an expected P/E ratio of 17.0.

The firm's price to earnings growth (PEG) is 2.11, which indicates that it is overvalued in terms of its expected rate of earnings growth.

Alphabet's price to book (P/B) ratio is 4.5 compared to its sector average of 2.62. The company is likley overvalued in terms of its net tangible assets. As of the date of publication, the company's shares are trading 86.0% above their fair value as expressed by Benjamin Graham's formula:

√(22.5 * TTM earnings per share * book value per share) = √(22.5 * 5.17 * 19.553) = $47.69

Alphabet Has an Average Rating of Buy and an Analyst Consensus of Strong Upside Potential:

10 analysts are following Alphabet and have set target prices ranging from $115 to $160 per share. On average, they have given the company a rating of strong buy. At the current price of $88.73, GOOG is trading -31.59% away from its average analyst target price of $129.7 per share, implying an analyst consensus of strong upside potential for the stock.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.