A strong performer from today's afternoon trading session is Alphabet, whose shares rose 6.1% to $106.54 per share. For those of you thinking about investing in the stock, here is a brief value analysis of the stock using the company's basic fundamental ratios.
Alphabet Inc. provides various products and platforms in the United States, Europe, the Middle East, Africa, the Asia-Pacific, Canada, and Latin America. The company belongs to the Communication Services sector, which has an average price to earnings (P/E) ratio of 18.65 and an average price to book (P/B) ratio of 2.62. In contrast, Alphabet has a trailing 12 month P/E ratio of 21.7 and a P/B ratio of 5.4.
P/B ratios are calculated by dividing the company's market value by its equity's book value. Equity refers to all of the company's assets minus its liabilities. Traditionally, a P/B ratio of around 1 shows that a company is fairly valued, but owing to consistently higher valuations in the modern era, investors generally compare against sector averages.
Alphabet's PEG ratio is 2.1, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.
