Don't overlook NASDAQ:GOOG—a stock with solid growth prospects and a reasonable valuation.

Last update: Oct 29, 2024

Our stock screener has spotted ALPHABET INC-CL C (NASDAQ:GOOG) as a growth stock which is not overvalued. NASDAQ:GOOG is scoring great on several growth aspects while it also shows decent health and profitability. At the same time it remains remains attractively priced. We'll dive into each aspect below.

Unpacking NASDAQ:GOOG's Growth Rating

To evaluate a stock's growth potential, ChartMill utilizes a Growth Rating on a scale of 0 to 10. This comprehensive assessment considers various growth aspects, including historical and estimated EPS and revenue growth. NASDAQ:GOOG has achieved a 7 out of 10:

The Earnings Per Share has grown by an impressive 47.67% over the past year.
Measured over the past years, GOOG shows a quite strong growth in Earnings Per Share. The EPS has been growing by 19.55% on average per year.
Looking at the last year, GOOG shows a quite strong growth in Revenue. The Revenue has grown by 13.38% in the last year.
GOOG shows quite a strong growth in Revenue. Measured over the last years, the Revenue has been growing by 17.57% yearly.
Based on estimates for the next years, GOOG will show a quite strong growth in Earnings Per Share. The EPS will grow by 19.96% on average per year.
GOOG is expected to show quite a strong growth in Revenue. In the coming years, the Revenue will grow by 10.62% yearly.

Analyzing Valuation Metrics

ChartMill provides a Valuation Rating to every stock, ranging from 0 to 10. This rating assesses various valuation aspects, comparing price to earnings and cash flows, while considering factors like profitability and growth. NASDAQ:GOOG boasts a 6 out of 10:

Based on the Price/Earnings ratio, GOOG is valued a bit cheaper than the industry average as 68.57% of the companies are valued more expensively.
GOOG's Price/Earnings ratio indicates a valuation a bit cheaper than the S&P500 average which is at 31.09.
Based on the Price/Forward Earnings ratio, GOOG is valued a bit cheaper than the industry average as 65.71% of the companies are valued more expensively.
Based on the Enterprise Value to EBITDA ratio, GOOG is valued a bit cheaper than 68.57% of the companies in the same industry.
Based on the Price/Free Cash Flow ratio, GOOG is valued a bit cheaper than 62.86% of the companies in the same industry.
The low PEG Ratio(NY), which compensates the Price/Earnings for growth, indicates a rather cheap valuation of the company.
The excellent profitability rating of GOOG may justify a higher PE ratio.
GOOG's earnings are expected to grow with 21.32% in the coming years. This may justify a more expensive valuation.

How We Gauge Health for NASDAQ:GOOG

ChartMill employs its own Health Rating for stock assessment. This rating, ranging from 0 to 10, is calculated by examining various liquidity and solvency ratios. In the case of NASDAQ:GOOG, the assigned 8 reflects its health status:

GOOG has an Altman-Z score of 13.51. This indicates that GOOG is financially healthy and has little risk of bankruptcy at the moment.
GOOG has a better Altman-Z score (13.51) than 92.86% of its industry peers.
GOOG has a debt to FCF ratio of 0.23. This is a very positive value and a sign of high solvency as it would only need 0.23 years to pay back of all of its debts.
With an excellent Debt to FCF ratio value of 0.23, GOOG belongs to the best of the industry, outperforming 82.86% of the companies in the same industry.
A Debt/Equity ratio of 0.04 indicates that GOOG is not too dependend on debt financing.
A Current Ratio of 2.08 indicates that GOOG has no problem at all paying its short term obligations.
A Quick Ratio of 2.08 indicates that GOOG has no problem at all paying its short term obligations.

Evaluating Profitability: NASDAQ:GOOG

ChartMill assigns a proprietary Profitability Rating to each stock. The score is computed by evaluating various profitability ratios and margins and ranges from 0 to 10. NASDAQ:GOOG was assigned a score of 9 for profitability:

GOOG's Return On Assets of 21.13% is amongst the best of the industry. GOOG outperforms 95.71% of its industry peers.
GOOG has a Return On Equity of 29.15%. This is amongst the best in the industry. GOOG outperforms 95.71% of its industry peers.
With an excellent Return On Invested Capital value of 25.85%, GOOG belongs to the best of the industry, outperforming 97.14% of the companies in the same industry.
GOOG had an Average Return On Invested Capital over the past 3 years of 22.84%. This is significantly above the industry average of 10.90%.
The last Return On Invested Capital (25.85%) for GOOG is above the 3 year average (22.84%), which is a sign of increasing profitability.
GOOG's Profit Margin of 26.70% is amongst the best of the industry. GOOG outperforms 94.29% of its industry peers.
GOOG's Operating Margin of 30.77% is amongst the best of the industry. GOOG outperforms 97.14% of its industry peers.
In the last couple of years the Operating Margin of GOOG has grown nicely.

Every day, new Affordable Growth stocks can be found on ChartMill in our Affordable Growth screener.

Our latest full fundamental report of GOOG contains the most current fundamental analsysis.

Disclaimer

This is not investing advice! The article highlights some of the observations at the time of writing, but you should always make your own analysis and invest based on your own insights.