Alphabet currently trades at $316.84 and has been a dream stock for shareholders. It’s returned 179% since April 2021, tripling the S&P 500’s 60.2% gain. The company has also beaten the index over the past six months as its stock price is up 31.2% thanks to its solid quarterly results.
Following the strength, is GOOGL a buy right now? Or is the market overestimating its value? Find out in our full research report, it’s free.
Why Is Alphabet a Good Business?
Started by Stanford students Larry Page and Sergey Brin in a Menlo Park garage, Alphabet (NASDAQ: GOOGL) is the parent company of the eponymous Google Search engine, Google Cloud Platform, and YouTube.
1. Skyrocketing Revenue Shows Strong Momentum
Alphabet proves that huge, scaled companies can still grow quickly. The company’s revenue base of $182.5 billion five years ago has more than doubled to $402.8 billion in the last year, translating into an incredible 17.2% annualized growth rate.
Alphabet’s growth over the same period was also higher than its big tech peers, Amazon (13.2%), Microsoft (14.8%), and Apple (8.2%). 
2. Operating Reveals a Well-Run Organization
Operating margin is the key profitability measure for Alphabet. It’s the portion of revenue left after accounting for all operating expenses – everything from the IT infrastructure powering online searches to product development and administrative expenses.
Alphabet has been a well-oiled machine over the last five years. It demonstrated elite profitability for a consumer internet business, boasting an average operating of 29.9%. A closer examination is required, however, because the company’s individual business lines have very different margin profiles.
3. Outstanding Long-Term EPS Growth
We track the long-term change in earnings per share (EPS) because it shows whether a company’s growth is profitable. It also explains how taxes and interest expenses affect the bottom line.
Alphabet’s EPS grew at 29.7% compounded annual growth rate over the last five years, higher than its 17.2% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
Final Judgment
These are just a few reasons why we think Alphabet is a high-quality business, and with its shares outperforming the market lately, the stock trades at 26.6× forward price-to-earnings (or $316.84 per share). Is now a good time to initiate a position? See for yourself in our comprehensive research report, it’s free.
Stocks We Like Even More Than Alphabet
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