Today we're going to take a closer look at Large-Cap Technology company Alphabet, whose shares are currently trading at $249.91. We've been asking ourselves whether the company is under or over valued at today's prices... let's perform a brief value analysis to find out!
a Very Low P/E Ratio but Trades Above Its Graham Number:
Alphabet Inc. offers 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 Technology sector, which has an average price to earnings (P/E) ratio of 30.44 and an average price to book (P/B) ratio of 4.19. In contrast, Alphabet has a trailing 12 month P/E ratio of 26.6 and a P/B ratio of 8.34.
Alphabet has moved 57.9% over the last year compared to 17.4% for the S&P 500 — a difference of 40.5%. Alphabet has a 52 week high of $253.04 and a 52 week low of $140.53.
Growing Revenues and Healthy Leverage Levels:
| 2021 | 2022 | 2023 | 2023 | 2024 | 2024 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $257,637 | $282,836 | $307,394 | $307,394 | $350,018 | $350,018 |
| Operating Margins | 31% | 26% | 27% | 27% | 32% | 32% |
| Net Margins | 30% | 21% | 24% | 24% | 28% | 28% |
| Net Income (M) | $76,033 | $59,972 | $73,795 | $73,795 | $100,118 | $100,118 |
| Net Interest Expense (M) | $346 | $357 | $308 | $308 | $4,482 | $4,482 |
| Depreciation & Amort. (M) | $10,273 | $13,475 | $11,946 | $11,946 | $15,311 | $15,311 |
| Diluted Shares (M) | 13,483 | 13,159 | 12,722 | 12,722 | 12,447 | 12,447 |
| Earnings Per Share | $5.64 | $4.56 | $5.8 | $5.8 | $8.04 | $8.04 |
| EPS Growth | n/a | -19.15% | 27.19% | 0.0% | 38.62% | 0.0% |
| Avg. Price | $125.53 | $126.61 | $139.69 | $140.93 | $251.61 | $251.61 |
| P/E Ratio | 22.26 | 27.89 | 24.25 | 24.47 | 31.26 | 31.26 |
| Free Cash Flow (M) | $67,012 | $60,010 | $69,495 | $69,495 | $72,764 | $72,764 |
| CAPEX (M) | $24,640 | $31,485 | $32,251 | $32,251 | $52,535 | $52,535 |
| EV / EBITDA | 18.95 | 18.87 | 18.46 | 18.63 | 24.41 | 24.41 |
| Total Debt (M) | $14,817 | $14,701 | $11,870 | $11,870 | $12,000 | $12,000 |
| Net Debt / EBITDA | -0.07 | -0.08 | -0.13 | -0.13 | -0.09 | -0.09 |
| Current Ratio | 2.93 | 2.38 | 2.1 | 2.1 | 1.84 | 1.84 |
Alphabet has growing revenues and increasing reinvestment in the business, strong operating margins with a stable trend, and positive EPS growth. The company also benefits from generally positive cash flows, a decent current ratio of 1.84, and healthy leverage levels.
