Alphabet logged a 1.9% change during today's evening session, and is now trading at a price of $179.63 per share.
Alphabet returned gains of 51.8% last year, with its stock price reaching a high of $180.85 and a low of $115.35. Over the same period, the stock outperformed the S&P 500 index by 25.6%. More recently, the company's 50-day average price was $169.39. Alphabet Inc. offers various products and platforms in the United States, Europe, the Middle East, Africa, the Asia-Pacific, Canada, and Latin America. Based in Mountain View, CA, the Large-Cap Technology company has 180,895 full time employees. Alphabet has not offered a dividend during the last year.
Strong Revenue Growth and Healthy Leverage Levels:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $136,819 | $161,857 | $182,527 | $257,637 | $282,836 | $307,394 |
| Operating Margins | 20% | 21% | 23% | 31% | 26% | 27% |
| Net Margins | 22% | 21% | 22% | 30% | 21% | 24% |
| Net Income (M) | $30,736 | $34,343 | $40,269 | $76,033 | $59,972 | $73,795 |
| Net Interest Expense (M) | $114 | $100 | $135 | $346 | $357 | $308 |
| Depreciation & Amort. (M) | $871 | $925 | $792 | $10,273 | $13,475 | $9,311 |
| Diluted Shares (M) | 13,906 | 13,904 | 13,746 | 13,483 | 13,219 | 12,807 |
| Earnings Per Share | $2.21 | $2.47 | $2.93 | $5.64 | $4.54 | $5.76 |
| EPS Growth | n/a | 11.76% | 18.62% | 92.49% | -19.5% | 26.87% |
| Avg. Price | $55.66 | $59.42 | $74.07 | $125.53 | $126.61 | $179.63 |
| P/E Ratio | 25.19 | 24.06 | 25.28 | 22.26 | 27.89 | 31.19 |
| Free Cash Flow (M) | $22,832 | $30,972 | $42,843 | $67,012 | $60,010 | $69,495 |
| CAPEX (M) | $25,139 | $23,548 | $22,281 | $24,640 | $31,485 | $32,251 |
| EV / EBITDA | 26.86 | 23.1 | 23.93 | 18.95 | 18.87 | 24.46 |
| Total Debt (M) | $5,341 | $4,554 | $13,932 | $14,817 | $14,701 | $13,253 |
| Net Debt / EBITDA | -0.4 | -0.4 | -0.3 | -0.07 | -0.08 | -0.12 |
| Current Ratio | 3.92 | 3.37 | 3.07 | 2.93 | 2.38 | 2.1 |
Alphabet has rapidly growing revenues and increasing reinvestment in the business, strong operating margins with a positive growth rate, and generally positive cash flows. The company also benefits from an excellent current ratio of 2.1, a strong EPS growth trend, and healthy leverage levels.
an Increase in Expected Earnings Improves Its Value Outlook but Trading Above Its Fair Price:
Alphabet has a trailing twelve month P/E ratio of 26.0, compared to an average of 32.54 for the Technology sector. Based on its EPS guidance of $8.6, the company has a forward P/E ratio of 19.7. According to the 21.4% compound average growth rate of Alphabet's historical and projected earnings per share, the company's PEG ratio is 1.21. Taking the weighted average of the company's EPS CAGR and the broader market's 5-year projected EPS growth rate, we obtain a normalized growth rate of 14.2%. On this basis, the company's PEG ratio is 1.83. This suggests that these shares are overvalued. Furthermore, Alphabet is likely overvalued compared to the book value of its equity, since its P/B ratio of 7.59 is higher than the sector average of 4.25. The company's shares are currently trading 235.4% below their Graham number. Ultimately, Alphabet's strong cash flows, decent earnings multiple, and healthy debt levels factor towards it being fairly valued, its elevated P/B ratio notwithstanding.
Analysts Give Alphabet an Average Rating of Buy:
The 44 analysts following Alphabet have set target prices ranging from $143.0 to $225.0 per share, for an average of $194.26 with a buy rating. The company is trading -7.5% away from its average target price, indicating that there is an analyst consensus of some upside potential.
Alphabet has a very low short interest because 0.9% of the company's shares are sold short. Institutions own 80.9% of the company's shares, and the insider ownership rate stands at 0.25%, suggesting a small amount of insider investors. The largest shareholder is Vanguard Group Inc, whose 8% stake in the company is worth $89,433,167,251.
