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Inside Alphabet’s Fundamental Analysis

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Mar. 12 2018, Published 1:39 p.m. ET

Deciphering Alphabet’s comprehensive valuation

Alphabet (GOOG) has EV (enterprise value) of $685.8 billion. By comparison, Alibaba (BABA), Facebook (FB), Baidu (BIDU), and eBay (EBAY)—Alphabet’s peer companies in the Internet sector—boast EVs of $475.8 billion, $487.9 billion, $89.5 billion, and $48.4 billion, respectively.

Alphabet’s EV-to-adjusted-EBITDA (enterprise value to adjusted earnings before interested, tax, depreciation and amortization) for the trailing 12 months is 19.2x. Its EV-to-estimated-EBITDA is 13.3x. Alphabet’s EBITDA margin for 2017 was 32%.

The company’s EV-to-sales ratio for the trailing 12 months is 6.2x, while its EV-to-sales ratio expected for 2018 is 4.4x.

Alphabet’s trailing-12-month EV-to-cash-flow and trailing-12-month EV-to-free-cash-flow are 18.5x and 28.7x, respectively.

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Inside Alphabet’s Price metrics

With a book value per share of $219.6, Alphabet is trading at a price-to-book value of 5.2x. Its estimated book value per share for 2018 is $235.5.

The company’s price-to-sales ratio is 7.1x, while its estimated price-to-sales for 2018 is 5.9x.

Understanding Alphabet’s earnings and sales

The EPS (earnings per share) of $32.5 that Alphabet posted last stemmed from total revenues of $110.9 billion. These revenues were up 23%. For 2018, its revenues are expected to be $156.6 billion, while its EPS is expected to be $41.4.

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Moving averages

On March 8, 2018, Alphabet closed the trading day at $1,126.0. Based on this figure, here’s how the stock fared in terms of its moving averages:

  • 5.8% above its 100-day moving average of $1,064
  • 1.9% above its 50-day moving average of $1,104
  • 3.4% above its 20-day moving average of $1,089

Market capitalization

Alphabet was the largest Internet player in terms of market capitalization globally at ~$784.4 billion. By comparison, Alibaba has a market cap of ~$479.4 billion, while Facebook’s market cap comes in at ~$529.7 billion. Baidu’s market cap is now ~$89.3 billion, and eBay has a market cap of ~$44.2 billion.

Alphabet’s credit rating

Moody’s rating of Alphabet’s debt is currently “Aa2.” The company also has an S&P debt rating and debt outlook of “AA+” and “stable,” respectively.

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