Alphabet Inc (GOOGL, Financial) has recently been in the spotlight, drawing interest from investors and financial analysts due to its robust financial stance. With shares currently priced at $154.09, Alphabet Inc has witnessed a daily loss of 0.3%, marked against a three-month change of 10.95%. A thorough analysis, underlined by the GF Score, suggests that Alphabet Inc is well-positioned for substantial growth in the near future.
What Is the GF Score?
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
- Financial strength rank: 9/10
- Profitability rank: 10/10
- Growth rank: 10/10
- GF Value rank: 5/10
- Momentum rank: 10/10
Each one of these components is ranked and the ranks also have positive correlation with the long term performances of stocks. The GF score is calculated using the five key aspects of analysis. Through backtesting, we know that each of these key aspects has a different impact on the stock price performance. Thus, they are weighted differently when calculating the total score. With high ranks in financial strength, profitability, growth, and momentum, and a moderate GF Value rank, GuruFocus assigned Alphabet Inc the GF Score of 97 out of 100, which signals the highest outperformance potential.
Understanding Alphabet Inc's Business
Alphabet Inc, with a market cap of $1.92 trillion and sales of $307.39 billion, operates as a holding company. Its subsidiary, internet media giant Google, accounts for nearly 90% of Alphabet's revenue, primarily from online ads. Other revenue streams include Google Play and YouTube sales, as well as hardware like Chromebooks, Pixel smartphones, and smart home products such as Nest and Google Home. Google's cloud computing services contribute over 10% to Alphabet's revenue. The company also invests in 'moonshot' technologies through its other bets segment, focusing on health, internet access, self-driving cars, and more.
Financial Strength Breakdown
Alphabet Inc's Financial Strength rating is a testament to its resilient balance sheet and prudent capital management. The company's Interest Coverage ratio of 273.68 far exceeds Benjamin Graham's recommended threshold, indicating a strong ability to cover interest obligations. With an Altman Z-Score of 12.2, Alphabet Inc is well-protected against financial distress. The company's strategic debt management is reflected in its Debt-to-Revenue ratio of 0.09, further solidifying its financial health.
Profitability Rank Breakdown
Alphabet Inc's Profitability Rank is outstanding, showcasing its ability to generate profits effectively. The company's Operating Margin has consistently increased over the past five years, reaching 27.42% in 2023. Alphabet's Gross Margin also demonstrates a positive trend, indicating increasing efficiency in converting revenue into profit. The Piotroski F-Score further confirms Alphabet Inc's solid financial condition, while its 5-star Predictability Rank provides investors with confidence in the company's consistent operational performance.
Growth Rank Breakdown
Alphabet Inc's high Growth Rank reflects its commitment to business expansion. The company's 3-Year Revenue Growth Rate of 22.1% surpasses 73.5% of its peers in the Interactive Media industry. Alphabet Inc's EBITDA has also shown significant growth, with a three-year growth rate of 19.6 and a five-year rate of 21.1, highlighting its ability to sustain growth momentum.
Conclusion: Alphabet Inc's Position for Outperformance
Considering Alphabet Inc's financial strength, profitability, and growth metrics, the GF Score highlights the firm's unparalleled position for potential outperformance. The company's strategic initiatives, robust financials, and innovative edge position it favorably in the competitive tech landscape. Investors seeking companies with strong GF Scores can explore further using the GF Score Screen. With Alphabet Inc's impressive GF Score of 97, is it time for value investors to consider this tech giant for their portfolios?
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
