A Look at Alphabet’s Valuation
Dissecting Alphabet’s debt situation
Alphabet’s (GOOG) balance sheet reflects total debt of $3.9 billion, and it reported total capital of ~$152.2 billion. As a result, its total-debt-to-total-capital ratio is 3%.
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Alphabet reported debt-to-equity, debt-to-assets, and debt-to-EBITDA1 ratios of ~2.7, 0.02, and 0.12, respectively. Its EBIT-to-interest ratio measures how easily a company can pay interest on outstanding debt, also known as the interest coverage ratio. Alphabet’s interest coverage ratio stands at ~989.8x, and its debt-to-enterprise value is 1%.
Examining Alphabet’s cash flow metrics
Alphabet has $94.7 billion of cash in hand. Its price-to-cash-flow and price-to-free-cash-flow multiples are 17.8x and 25.3x, respectively. For the trailing 12 months, the company’s EV-to-cash-flow multiple was 15.1x, and its EV-to-free-cash-flow multiple was 21.7x.
Shareholder returns and stock trends
Alphabet generated investor returns of ~-1.7% in the trailing-one-month period and ~16.5% in the trailing-12-month period. The company’s stock price lost ~1.5% in the trailing-five-day period.
A look at Alphabet’s EBITDA numbers
Alphabet’s EBITDA declined 16% to $32.2 billion in 2016. Analysts expect the company to post EBITDA of $43.4 billion, implying a potential fall of 16%. Alphabet’s price-to-EBITDA multiple is 19.8x.
Alphabet’s peers Twitter, Groupon, Amazon, and Square reported price-to-EBITDA multiples of 54.1x, 22.2x, 36.0x, and 430.6x, respectively.
Alphabet’s credit rating
Moody’s rating on Alphabet’s debt is Aa2. The company also has an S&P debt rating and debt outlook of AA+ and “stable,” respectively.
- earnings before interest, tax, depreciation, and amortization ↩