A Stock Analysis of Alphabet



What’s Alphabet’s economic value?

Alphabet (GOOG) boasts a total economic or enterprise value (or EV) of $690.8 billion. In comparison, Alibaba (BABA), Amazon (AMZN), Baidu (BIDU), and Facebook (FB), Alphabet’s peers in the Internet sector, boast EVs of $469.1 billion, $623.6 billion, $83.5 billion, and $484.2 billion, respectively.

How does Alphabet’s EV compare to its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) for the last 12 months? The company has an EV-to-adjusted trailing-12-month EBITDA multiple of 20.1x. Its EV-to-EBITDA multiple for the current year is projected to be 15.7x. Alphabet’s EBITDA margin for 2017 is 33%.

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Looking deeper into Alphabet’s EV ratios reveals an EV-to-sales multiple of 6.6x for the trailing 12 months. The company’s EV-to-projected sales multiple for the next year is 5.3x. Its trailing-12-month EV-to-cash flow multiple is 19.1x, and its trailing-12-month EV-to-free cash flow multiple is 28.5x.

EBIT on interest coverage ratio

Can Alphabet easily pay interest on its outstanding debt? The answer lies in examining the company’s EBIT-on-interest ratio, also called its interest coverage ratio, which is 1,079.2x. As for debt on economic value, Alphabet has a debt-to-enterprise value of 1%.

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Understanding Alphabet’s earnings and sales

Alphabet posted EPS (earnings per share) of $28.3 on total revenue of $104.6 billion, a rise of 22%, in 2017. In 2018, Alphabet’s revenue is expected to be $131.2 billion, and its EPS are expected to be $32.3.

Inside Alphabet’s price and valuation multiples

Alphabet’s 2017 book value per share of $226.5 compares with its expected book value per share of $219.8 for 2018. Alphabet’s shares are trading at a price-to-book value of 5.02x.

The company’s 2017 price-to-sales ratio of 7.6x is higher than its expected 2018 price-to-sales ratio of 7.2x.


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