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 $157.08, Alphabet Inc has witnessed a daily gain of 0.6%, marked against a three-month change of 10.18%. 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: 8/10
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, and growth, but 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 is a holding company, with internet media giant Google as a wholly owned subsidiary. Google services account for nearly 90% of Alphabet's revenue, of which more than 85% is from online ads. Other revenue streams include sales of apps and content on Google Play and YouTube, as well as hardware such as Chromebooks, the Pixel smartphone, and smart home products, which include Nest and Google Home. Google's cloud computing offerings account for a bit more than 10% of total Alphabet revenue. Alphabet's moonshot investments are in its other bets segment, where it bets on technology to enhance health (Verily), provide faster internet access (Google Fiber), enable self-driving cars (Waymo), and more. With a market cap of $1.96 trillion and sales of $307.39 billion, Alphabet Inc's operating margin stands at 27.42%, reflecting its significant market presence and operational efficiency.
Financial Strength Breakdown
Alphabet Inc's robust balance sheet exhibits resilience against financial volatility, reflecting prudent management of capital structure. The Interest Coverage ratio for Alphabet Inc stands impressively at 273.68, underscoring its strong capability to cover its interest obligations. This robust financial position resonates with the wisdom of legendary investor Benjamin Graham, who favored companies with an interest coverage ratio of at least 5. With an Altman Z-Score of 12.3, Alphabet Inc exhibits a strong defense against financial distress, highlighting its robust financial stability. With a favorable Debt-to-Revenue ratio of 0.09, Alphabet Inc's strategic handling of debt solidifies its financial health.
Profitability Rank Breakdown
The Profitability Rank shows Alphabet Inc's impressive standing among its peers in generating profit. Alphabet Inc's Operating Margin has increased over the past five years, with a current rate of 27.42%. Furthermore, Alphabet's Gross Margin has seen a consistent rise over the past five years, as evidenced by the data: 2019: 55.58; 2020: 53.58; 2021: 56.94; 2022: 55.38; 2023: 56.63; . This trend underscores the company's growing proficiency in transforming revenue into profit. The Piotroski F-Score confirms Alphabet Inc's solid financial situation based on Joseph Piotroski's nine-point scale, which measures a company's profitability, funding and operating efficiency. Alphabet Inc's strong Predictability Rank of 5.0 stars out of five underscores its consistent operational performance, providing investors with increased confidence.
Growth Rank Breakdown
Ranked highly in Growth, Alphabet Inc demonstrates a strong commitment to expanding its business. The company's 3-Year Revenue Growth Rate is 22.1%, which outperforms better than 73.41% of companies in the Interactive Media industry. Moreover, Alphabet Inc has seen a robust increase in its earnings before interest, taxes, depreciation, and amortization (EBITDA) over the past few years. Specifically, the three-year growth rate stands at 19.6, and the rate over the past five years is 21.1. This trend accentuates the company's continued capability to drive growth.
Next Steps
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, innovative technology, and strong market position make it a compelling choice for investors looking for sustainable growth and robust financial health. As the tech giant continues to navigate the dynamic digital landscape, its ability to adapt and innovate suggests a promising trajectory for future success.
GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen
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.
