Inside Alphabet’s Fundamental Analysis
Deciphering Alphabet’s comprehensive valuation
Alphabet (GOOG) has an EV (enterprise value) of ~$586.7 billion. By comparison, peer companies Amazon.com (AMZN), Alibaba (BABA), Facebook (FB), and eBay (EBAY) have EVs of ~$475.8 billion, ~$391.7 billion, ~$439.7 billion, and ~$42.1 billion, respectively.
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Alphabet’s EV-to-adjusted-EBITDA (enterprise value to adjusted earnings before interested, tax, depreciation, and amortization) multiple for the trailing 12 months is 18.8x. Its EV-to-estimated-EBITDA for 2017 is 13.4x. Its EV-to-sales for the trailing 12 months is 6.2x, while it EV-to-sales is expected to be 4.7x in 2017.
Alphabet’s trailing-12-month EV-to-cash-flow and its trailing-12-month EV-to-free-cash-flow are 15.5x and 21.2x, respectively.
Earnings and sales
Alphabet’s EPS of $28.3 over the past year came from total sales of $94.7 billion, which grew 22% annually. Sales this year are expected to expand to ~$125.3 billion in 2017.
With a book value per share of ~$209.6, Alphabet is trading at a price-to-book value of 4.7x. The estimated book value per share of the stock is ~$242.32 for 2017.
Alphabet’s price-to-sales ratio is 7.2x, while its estimated price-to-sales for 2017 is 6.3x.
Alphabet’s debt situation
Alphabet’s balance sheet reflects a total debt of $3.9 billion. The company reported total capital of ~$148.9 billion. This means its total-debt-to-total-capital ratio comes to 3%.
The company’s debt-to-assets, debt-to-equity, and debt-to-EBITDA ratios work out to be 0.02x, 2.7x, and 0.13x, respectively. Alphabet has an EBIT-to-interest ratio of 849.3x. This provides a clue on a company’s ability to pay interest on outstanding debt. It has a better capacity to repay its interest.
The company has a debt-to-enterprise value of 1%.
Moody’s rating of Alphabet’s debt is Aa2. The company also has an S&P debt rating and debt outlook of AA+ and “stable,” respectively.