What Is Alphabet Inc.'s (NASDAQ:GOOGL) Share Price Doing?

Today we're going to take a look at the well-established Alphabet Inc. (NASDAQ:GOOGL). The company's stock saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$2,960 and falling to the lows of US$2,519. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Alphabet's current trading price of US$2,554 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Alphabet’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Alphabet

Is Alphabet still cheap?

Great news for investors – Alphabet is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Alphabet’s ratio of 22.19x is below its peer average of 27.98x, which indicates the stock is trading at a lower price compared to the Interactive Media and Services industry. However, given that Alphabet’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will Alphabet generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Alphabet's earnings over the next few years are expected to increase by 35%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? Since GOOGL is currently below the industry PE ratio, it may be a great time to increase your holdings in the stock. With a positive outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on GOOGL for a while, now might be the time to enter the stock. Its buoyant future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy GOOGL. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed investment decision.

Diving deeper into the forecasts for Alphabet mentioned earlier will help you understand how analysts view the stock going forward. At Simply Wall St, we have the analysts estimates which you can view by clicking here.

If you are no longer interested in Alphabet, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

What are the risks and opportunities for Alphabet?

NasdaqGS:GOOGL

Alphabet

Alphabet Inc. offers various products and platforms in the United States, Europe, the Middle East, Africa, the Asia-Pacific, Canada, and Latin America.Show more

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Rewards

• Trading at 23.6% below our estimate of its fair value

• Earnings are forecast to grow 13.08% per year

Risks

No risks detected for GOOGL from our risks checks.

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1Y Return

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.