Let’s talk about the popular Alphabet Inc. (NASDAQ:GOOGL). The company’s shares received a lot of attention from a substantial price movement on the NASDAQGS over the last few months, increasing to US$130 at one point, and dropping to the lows of US$106. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Alphabet’s current trading price of US$108 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Alphabet’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Check out our latest analysis for Alphabet
What is Alphabet worth?
Good news, investors! Alphabet is still a bargain right now according to my price multiple model, which compares the company’s price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Alphabet’s ratio of 19.06x is below its peer average of 36.1x, which indicates the stock is trading at a lower price compared to the Interactive Media and Services industry. What’s more interesting is that, Alphabet’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What does the future of Alphabet look like?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations. With profit expected to grow by 33% over the next couple of years, the future seems bright for Alphabet. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? Since GOOGL is currently below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current price multiple.
Are you a potential investor? If you’ve been keeping an eye on GOOGL for a while, now might be the time to enter the stock. Its prosperous future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy GOOGL. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed assessment.
Diving deeper into the forecasts for Alphabet mentioned earlier will help you understand how analysts view the stock going forward. Luckily, you can check out what analysts are forecasting by clicking here.
If you are no longer interested in Alphabet, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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