Alphabet shares fell by -1.4% during the day's morning session, and are now trading at a price of $277.52. Is it time to buy the dip? To better answer that question, it's essential to check if the market is valuing the company's shares fairly in terms of its earnings and equity levels.
a Very Low P/E Ratio but Priced at a Premium:
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 27.4 and a P/B ratio of 8.66.
Alphabet has moved 64.3% over the last year compared to 19.1% for the S&P 500 — a difference of 45.2%. Alphabet has a 52 week high of $291.59 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 | $281.48 | $281.48 |
| P/E Ratio | 22.26 | 27.89 | 24.25 | 24.47 | 34.97 | 34.97 |
| 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 | 27.32 | 27.32 |
| 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.
