Alphabet Inc. (GOOGM) stock analysis

P/E below its 5-year median

Alphabet's P/E of 14.1 is below its own 5-year median of 25.5.

P/E below the industry

Alphabet's P/E of 14.1 is below the Computer Programming, Data Processing, and Other Computer Related Services median of 26.0.

EV/EBITDA above its 5-year median

Alphabet's EV/EBITDA of 22.2 is above its 5-year median of 20.7.

P/B above the industry

Alphabet's price-to-book of 5.34 is above the Computer Programming, Data Processing, and Other Computer Related Services median of 3.29.

Trading below fair value

The share price of $279.84 is below our fair value estimate of $388.19.

Margin of safety over 20%

The price is 27.9% below fair value, more than the 20% cushion we look for.

Revenue growing 10%+ a year

Revenue grew 12.5% a year over the last three fiscal years.

EPS growing 10%+ a year

Diluted EPS grew 33.3% a year over the last three fiscal years.

Earnings growth accelerating

Net income grew 111% over the last twelve months, against a 5-year average of 26.8% a year.

Growing faster than the industry

Revenue grew 20.1% over the last twelve months; the Computer Programming, Data Processing, and Other Computer Related Services median is 10.8%.

Guidance issued

The latest outlook (2026 CapEx investments, Feb 4, 2026) was issued for the first time, so it neither adds nor takes away points.

Gross margin improving

Gross margin was 60.9% over the last twelve months, against 58.9% a year earlier.

Return on equity over 15%

Return on equity was 48.7% over the last twelve months and averaged 30.3% over five years.

Return on capital over 10%

Return on invested capital was 30.4%, above the 10% that usually covers the cost of capital.

Return on equity above the industry

Alphabet's return on equity of 48.7% is above the Computer Programming, Data Processing, and Other Computer Related Services median of -0.3%.

Earnings grew over 5 years

Net income grew 26.8% a year on average over the last five fiscal years.

Net margin above its 5-year average

Net margin was 54.8% over the last twelve months, against a 5-year average of 27.2%.

Net margin above the industry

Alphabet's net margin of 54.8% is above the Computer Programming, Data Processing, and Other Computer Related Services median of -4.9%.

Low debt

Debt is 15.6% of shareholders' equity, under the 40% we consider low.

Debt rising against equity

Debt to equity rose from 6.7% five years ago to 15.6%.

Debt covered by cash flow

Operating cash flow over the last twelve months equals 185% of total debt.

Interest well covered

Operating income covers interest expense 65.6 times.

Short-term assets cover short-term debts

Current assets are 2.72 times current liabilities.

Low bankruptcy risk

The Altman Z-score is 9.34; above 3 is the safe zone and below 1.8 the distress zone.

Pays a dividend

Alphabet paid dividends worth 0.3% of the share price over the last twelve months.

Yield below Treasuries

The 0.3% yield is below the 4.4% on a 1-year Treasury.

Yield below the top quarter

The top quarter of US dividend payers yield 4.0% or more; Alphabet yields 0.3%.

Dividend stability

Fewer than five years of dividend history.

Earnings cover

Needs dividends paid and net income.

Cash-flow cover

Needs dividends paid and free cash flow.