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A Closer Look at Alphabet’s Profitability Ratio

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Dec. 14 2018, Updated 7:31 a.m. ET

Profitability ratio

Alphabet’s (GOOGL) TTM (trailing-12- month) gross margin is 60.18%, while the industry and sector averages are 41.89% and 40.91%, respectively. Alphabet’s five-year gross margin is 61.61%.

Alphabet’s TTM operating margin is 23.27%, whereas the industry and sector averages are 10.50% and 15.94%, respectively. Peers Facebook (FB), Baidu (BIDU), Yelp (YELP), and Twitter (TWTR) have TTM operating margins of 46.43%, 15.07%, 1.51%, and -12.33%, respectively.

Alphabet’s TTM net profit margin is 19.49%, and the industry and sector averages are 3.06% and 12.52% respectively. The company’s TTM EBITDA margin is 32.44%. Its five-year average is 33.48%, compared with the industry average of 36.12%.

Alphabet’s TTM and five-year pre-tax margins are 24.27% and 26.68%, while the industry averages are 10.93% and 27.44%. Its TTM effective tax rate is 19.73%, compared with the industry average of 28.98%. The company’s five-year average is 18.89%.

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Efficiency

Alphabet’s TTM revenue-to-employee ratio is 1,377,805x, and the industry and sector averages are 30,250,256x and 5,668,927x, respectively. Meanwhile, its TTM net-income-to-employee ratio is 268,469x, compared with the industry and sector averages of 5,463,648x and 592,260x. Alphabet’s TTM receivable turnover ratio is 7.73x.

Management’s effectiveness

Alphabet’s TTM ROA (return-on-assets) ratio is 11.62x, while the industry and sector averages are 11.29x and 10.71x, respectively. Its five-year ROA ratio is 12.33x, and the industry’s and sector’s are 12.17x and 9.77x. Alphabet’s TTM ROI (return-on-investment) ratio is 13.03x, and its five-year average is 14.20x. Its TTM return-on-equity ratio is 14.01x.

Financial strength

In the recent quarter, Alphabet’s quick ratio was 5.99x, and the industry average was 1.96x. Its current ratio was 6.01x, and its long-term debt-to-equity ratio was 2.67x. Alphabet’s TTM interest-coverage ratio is 39.12x, while the industry and sector averages are 24.16x and 16.59x, respectively.

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