When Should You Buy Alphabet Inc. (NASDAQ:GOOGL)?

September 10, 2022
  •  Updated
October 03, 2022
NasdaqGS:GOOGL
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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$122 and falling to the lows of US$105. 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$111 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?

Good news, investors! Alphabet is still a bargain right now according to my price multiple model, which compares 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 20.04x is below its peer average of 26.38x, which indicates the stock is trading at a lower price compared to the Interactive Media and Services industry. Although, there may be another chance to buy again in the future. This is because Alphabet’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What does the future of Alphabet look like?

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NasdaqGS:GOOGL Earnings and Revenue Growth September 10th 2022

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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 32%, 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 accumulate more of your holdings in the stock. With an optimistic 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 capital structure 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 prosperous 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 assessment.

It can be quite valuable to consider what analysts expect for Alphabet from their most recent forecasts. Luckily, you can check out what analysts are forecasting by clicking here.

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