Alphabet Inc (NASDAQ:GOOGL) has been in the limelight lately, attracting the interest of investors and financial analysts due to its strong financial stance. Shares are currently priced at 132.85, Alphabet Inc has seen a one-period gain of 2.92%, marked against a three-month change of 7.99%. An in-depth analysis as outlined by GuruFocus Score Rating reveals that Alphabet Inc. is well positioned for substantial growth in the near future.
Alphabet Inc.’s winning formula: Delving deep into financial metrics and competitive forces
What is GF Score?
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation that have been found to be closely related to a stock’s long-term performance by backtesting from 2006 to 2021. Stocks with higher GF scores generally generate higher returns than those with lower GF scores. Hence, while picking stocks, investors should invest in companies with high GF scores. GF scores range from 0 to 100, with 100 being the highest rank.
The GF Score components of Alphabet Inc. are as follows:
Each of these components is ranked and the rank also has a positive correlation with the long-term performance of the stocks. The GF score is calculated using five key aspects of analysis. Through backtesting, we know that each of these key factors has a different effect on stock price performance. Thus, they are given different weightage while calculating the total score. GuruFocus gave Alphabet Inc. a GF score of 98 out of 100, indicating high outperform potential, with high ranks in financial strength, profitability and growth and good ranks in GF value and momentum.
Understanding Alphabet Inc Business
Alphabet Inc. is a holding company with a market cap of $1.68 trillion and sales of $289.53 billion. Internet media giant Google is a wholly owned subsidiary. Google generates 99% of Alphabet’s revenue, of which more than 85% comes from online advertising. Google’s other revenue comes from the sale of apps and content on Google Play and YouTube, as well as cloud service fees and other licensing revenue. Sales of hardware such as Chromebooks, Pixel smartphones and smart home products, including Nest and Google Home, also contributed to other revenue. Alphabet’s major investments are in its Other Bets segment, where it bets on technology to improve healthcare (Verily), provide faster internet access (Google Fiber), enable self-driving cars (Waymo) and more. Puts
Alphabet Inc.’s winning formula: Delving deep into financial metrics and competitive forces
breakdown of financial strength
As per the Financial Strength Rating, Alphabet Inc’s strong balance sheet reflects resilience against financial volatility, reflecting prudent management of capital structure.
The interest coverage ratio for Alphabet Inc. stands at an impressive 237.41, underscoring its strong ability to cover its interest obligations. This strong financial position matches the wisdom of famed investor Benjamin Graham, who favored companies with an interest coverage ratio of at least 5.
With an Altman Z-score of 10.86, Alphabet Inc. demonstrates a strong hedge against financial distress, highlighting its strong financial stability.
With a favorable debt-to-earnings ratio of 0.1, Alphabet Inc.’s strategic management of debt underpins its financial health.
Breakdown of Profitability Ranks
The profitability rank reflects Alphabet Inc.’s dominant position among its peers in generating profits.
Alphabet Inc. operating margin has grown over the past five years (11.07%), as shown by the following data: 2018: 23.82; 2019: 22.20; 2020: 22.59; 2021: 30.55; 2022: 26.46; ,
Alphabet Inc’s strong predictability rank of 4.5 out of five stars underlines its consistent operating performance, providing increased investor confidence.
growth rank breakdown
Positioned high in growth, Alphabet Inc. demonstrates a strong commitment to expanding its business.
The company’s 3-year revenue growth rate is 22.9%, which outperforms 73.74% of 514 companies in the Interactive Media industry.
Furthermore, Alphabet Inc. has seen strong growth in its earnings before interest, taxes, depreciation and amortization (EBITDA) over the past few years. Specifically, the three-year growth rate is 21.8, and the rate for the last five years is 25.4. This trend enhances the company’s continued ability to drive growth.
Alphabet Inc.’s winning formula: Delving deep into financial metrics and competitive forces
conclusion
Given Alphabet Inc.’s strong financial strength, profitability and growth metrics, the GuruFocus Score rating highlights the firm’s unique position for potential outperform. This analysis underscores Alphabet Inc.’s strong financial health, consistent profitability and impressive growth, making it an attractive investment opportunity for value investors.
GuruFocus Premium members can find more companies with strong GF scores using the following screener link: GF Score Screener
This article first appeared on GuruFocus.
Source: finance.yahoo.com
