The calculations below outline how an intrinsic value for Alphabet is arrived at by discounting future cash flows to their present value. We use analyst's estimates of cash flows going forward 5 years.
See our documentation to learn about this calculation.
|Levered FCF (USD, Millions)||$25,546.53||$30,170.08||$35,758.67||$38,486.21||$44,824.48|
|Source||Analyst x18||Analyst x18||Analyst x9||Analyst x8||Analyst x5|
Discounted (@ 10.6%)
Present value of next 5 years cash flows:
Terminal Value = FCF2021 × (1 + g) ÷ (Discount Rate – g)
Terminal Value = $44,824 × (1 + 2.5%) ÷ (10.6% – 2.5%)
Terminal value based on the Perpetuity Method where growth (g) = 2.5%:
Present value of terminal value:
Equity Value (Total value) = Present value of next 5 years cash flows + terminal value
Value = Total value / Shares Outstanding ($468,607 / 685)
Value per share:
Current discount (share price of $878.93): -28%
The discount rate, or required rate of return, is estimated by calculating the Cost of Equity.
Discount rate = Cost of Equity = Risk Free Rate + (Levered Beta * Equity Risk Premium)
Discount rate = 10.6% = 2.47% + (1.079 * 7.53%)
The Levered Beta is the Unlevered Beta adjusted for financial leverage. It is limited to 0.8 to 2.0 (practical range for a stable firm).
Levered Beta = Unlevered beta (1 + (1- tax rate) (Debt/Equity))
1.079 = 1.074 (1 + (1- 30%) (0.65%))
Levered Beta used in calculation = 1.079
Are Alphabet's annual earnings growth expected to exceed 3.6% over the next 3 years?
Dr. Lawrence Edward Page, also known as Larry, is Co-Founder of Alphabet Inc. and has been its Chief Executive Officer since October 2, 2015. Dr. Page co-founded Google Inc. in 1998 and served as its Chief Executive Officer from April 4, 2011 to October 2, 2015. He served as Chief Executive Officer of Google Inc. from September 1998 to July 2001 and served as its Chief Financial Officer from September 1998 to July 2002. He served as President of Products at Alphabet Inc. from July 2001 to April 2011 and also served as its Assistant Secretary. He worked at Chips & Technologies, Inc. He served as President of the University's Eta Kappa Nu Honor Society and built a programmable plotter and inkjet printer out of Legoš. He has been a Director of Google Inc., since its inception in September 1998 and Alphabet Inc., since October 2, 2015. Dr. Page serves as a Trustee of XPRIZE Foundation, Inc. He is a Member of the National Advisory Committee (NAC) for the University of Michigan College of Engineering. He is a speaker at such forums as the Technology, Entertainment and Design Conference, The Wall Street Journal Technology Summit, the World Economic Forum and the Commonwealth Club. He served at National Academy of Engineering since 2004. He was named a World Economic Forum Global Leader for Tomorrow in 2002 as well as a “Young Innovator Who Will Create the Future“ by MIT's Technology Review magazine. He was recognized as Research and Development Magazine's Innovator of the Year. He was honored with the Marconi Prize in 2004. Dr. Page was granted an honorary MBA by Instituto De Empresa and was the first recipient of the University of Michigan Alumni Society Recent Engineering Graduate Award. He holds a Masters degree in Computer Science from Stanford University and a Bachelor of Science degree in Computer Engineering from the University of Michigan.
Average tenure of the Alphabet management team:
Average tenure of the Alphabet board of directors:
Alphabet Inc., through its subsidiaries, provides online advertising services in the United States, the United Kingdom, and rest of the world. The company offers performance and brand advertising services. It operates through Google and Other Bets segments. The Google segment includes principal Internet products, such as Search, Ads, Commerce, Maps, YouTube, Google Cloud, Android, Chrome, and Google Play, as well as technical infrastructure and newer efforts, including Virtual Reality. This segment also sells digital contents, apps and cloud offerings, and hardware products. The Other Bets segment includes businesses, such as Access, Calico, CapitalG, GV, Nest, Verily, Waymo, X, and Google Fiber. Alphabet Inc. was founded in 1998 and is headquartered in Mountain View, California.
|Market Cap:||$602,100 million|
1600 Amphitheatre Parkway, Mountain View, 94043, United States
|Industry:||Internet Software and Services|
|Sector:||Software and Services|