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Parsing Alphabet’s 4Q17 Results

PART:
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Part 6
Parsing Alphabet’s 4Q17 Results PART 6 OF 7

An Analysis of Alphabet Stock

What’s Alphabet’s economic value?

Alphabet boasts a total economic or EV (enterprise value) of $633.9 billion. In comparison, Amazon (AMZN), Alibaba (BABA), Baidu (BIDU), and PayPal (PYPL), Alphabet’s peer companies in the Internet sector, have EVs of $697.8 billion, $455.8 billion, $73.3 billion, and $85.4 billion, respectively.

An Analysis of Alphabet Stock

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How does Alphabet’s EV compare with its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) for the last 12 months? Its EV-to-adjusted-trailing-12-month EBITDA ratio is 17.7x. Its EV-to-EBITDA ratio for the current year is projected at 12.3x. Alphabet’s EBITDA margin for 2017 is 32%.

Looking at Alphabet’s EV ratios reveals an EV-to-sales ratio for the trailing 12 months of 5.7x. The EV-to-projected sales ratio for 2018 is 4.1x.

Alphabet’s cash flow numbers on focus

Alphabet has cash on hand of $101.9 billion. Alphabet stock is trading at price-to-cash-flow and price-to-free-cash-flow ratios of 19.6x and 30.6x, respectively. For the past year, its EV-to-cash-flow ratio is 17.1x, while its EV-to-free-cash-flow ratio is 26.5x.

EBIT-on-interest ratio

Can Alphabet easily pay interest on its outstanding debt? The answer lies in examining the company’s EBIT-on-interest ratio, also called interest coverage ratio, which in this case is 1,090.9x.

As for the company’s debt on economic value, Alphabet has a debt-on-enterprise-value ratio of 1%.

Understanding Alphabet’s earnings and sales

The EPS (earnings per share) of $18.30 that Alphabet posted stemmed from total revenue of $110.9 billion. Its revenue rose 23%. For 2018, revenue is expected to be $156.6 billion, and EPS is expected to be $41.50.

Market capitalization

Alphabet is the fifth-largest Internet player in terms of market capitalization globally at ~$732 billion. In comparison, below are the market capitalizations for its peers:

  • Amazon: $684.8 billion
  • Alibaba: $459.1 billion
  • Baidu: $78.3 billion
  • PayPal: $90.1 billion
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