What a fantastic six months it’s been for Alphabet. Shares of the company have skyrocketed 74.6%, hitting $308.69. This was partly due to its solid quarterly results, and the performance may have investors wondering how to approach the situation.
Is now still a good time to buy GOOGL? Or are investors being too optimistic? Find out in our full research report, it’s free for active Edge members.
Why Is GOOGL 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 shows that fast growth and massive scale can coexist despite conventional wisdom. The company’s revenue base of $171.7 billion five years ago has more than doubled to $385.5 billion in the last year, translating into an incredible 17.6% annualized growth rate.
Alphabet’s growth over the same period was also higher than its big tech peers, Amazon (14.7%), Microsoft (14.8%), and Apple (8.7%). 
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 29.7%. 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 an astounding 31.2% compounded annual growth rate over the last five years, higher than its 17.6% 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 the recent rally, the stock trades at 29.3× forward price-to-earnings (or $308.69 per share). Is now the time to buy despite the apparent froth? See for yourself in our in-depth research report, it’s free for active Edge members.
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