Alphabet currently trades at $316.84 and has been a dream stock for shareholders. It’s returned 179% since April 2021, tripling the S&P 500’s 60.2% gain. The company has also beaten the index over the past six months as its stock price is up 31.2% thanks to its solid quarterly results.
Following the strength, is GOOGL a buy right now? Or is the market overestimating its value? Find out in our full research report, it’s free.
Started by Stanford students Larry Page and Sergey Brin in a Menlo Park garage, Alphabet (NASDAQ:GOOGL) is the parent company of the eponymous Google Search engine, Google Cloud Platform, and YouTube.
Alphabet proves that huge, scaled companies can still grow quickly. The company’s revenue base of $182.5 billion five years ago has more than doubled to $402.8 billion in the last year, translating into an incredible 17.2% annualized growth rate.
Alphabet’s growth over the same period was also higher than its big tech peers, Amazon (13.2%), Microsoft (14.8%), and Apple (8.2%).
Operating margin is the key profitability measure for Alphabet. It’s the portion of revenue left after accounting for all operating expenses – everything from the IT infrastructure powering online searches to product development and administrative expenses.
Alphabet has been a well-oiled machine over the last five years. It demonstrated elite profitability for a consumer internet business, boasting an average operating of 29.9%. A closer examination is required, however, because the company’s individual business lines have very different margin profiles.
We track the long-term change in earnings per share (EPS) because it shows whether a company’s growth is profitable. It also explains how taxes and interest expenses affect the bottom line.
Alphabet’s EPS grew at 29.7% compounded annual growth rate over the last five years, higher than its 17.2% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
These are just a few reasons why we think Alphabet is a high-quality business, and with its shares outperforming the market lately, the stock trades at 26.6× forward price-to-earnings (or $316.84 per share). Is now a good time to initiate a position? See for yourself in our full research report, it’s free.
ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren’t just high-quality businesses. Something is happening with them right now. Elite fundamentals meeting near-term momentum — both boxes checked at the same time.
