Newsletter Login



Need help logging in?

New Subscriber?
Start Here!

Stock Spotlight

Alphabet keeps cards close to vest

Recent Price
P/E Ratio
Shares (millions)
Long-Term Debt as % of Capital
52-Week Price Range
$1,273.89 - $970.11

Alphabet ($1,202; GOOGL) produces operating momentum rare for a company of its size. Of the 30 largest stocks in the S&P 500 Index by market value, only Alphabet, ($1,783; AMZN), Chevron ($126; CVX), and Facebook ($164; FB) grew earnings per share and sales by more than 20% in the past year. All four companies also generated growth in operating cash flow that exceeded 20%.

For Alphabet, that growth comes with a trade-off — its reticence. It refrains from offering specific guidance and is usually opaque about operations beyond its massive advertising business.

Given management’s reluctance to divulge many details of its business, Alphabet can seem like a black box for investors and analysts alike. But the stock’s growth profile and reasonable valuation make Alphabet a Focus List Buy and a Long-Term Buy.

Business breakdown

The advertising business — digital ads placed on, Gmail, Google Maps, YouTube, and other websites — generated $116.32 billion in sales last year (85% of total sales), up 22%. But it’s not clear how much each of these platforms contributes to the ad business, nor their respective growth rates.

For what would be a major business line for virtually any other S&P 500 company, Alphabet’s cloud-computing services are lumped together with its application store Google Play, home-security service Nest, Pixel smartphone, and Slate tablet. Altogether, this group of dissimilar products grew sales 33% to $19.91 billion last year (15% of total revenue). Yet, Alphabet offers few details about its cloud operations other than it’s a “fast-growing multi-billion-dollar business” with 5,000 customers that doubled its number of deals worth more than $1 million last year.

What management calls Other Bets produced $595 million in sales (less than 1%), primarily from internet and TV services, as well as its health-data business Verily. This unit also includes the automated-car business Waymo.

The company’s aggressive spending habits can cause investors to fret that costs may spiral out of control. Capital expenditures soared 91% to $25.14 billion last year as the company built new data centers, deployed undersea cables, and invested in other networking infrastructure. Looking ahead, management will only say that it expects capital expenditures to keep climbing in 2019, though the growth rate should “moderate quite significantly.”

That heavy investment has caused free cash flow to slip in five of the past seven quarters. But net cash rose 7% to $105.13 billion in the past year, representing about 13% of Alphabet’s market value. Among the largest 100 companies in the S&P 500, only Apple has stashed on its balance sheet more net cash relative to its market value.


Alphabet will never be mistaken for a value stock. At 24 times trailing earnings, the shares trade 20% below their own five-year median.

Alphabet Inc., 1600 Amphitheatre Parkway, Mountain View, CA 94043; (650) 253-0000;


Quarter Per-Share Earnings* Sales Change Quarterly Price Range P/E Ratio Range
Dec '18 $12.77 vs. 9.70 22% $1,135.00 - $977.66 26 - 22
Sep '18 13.06 vs. 9.57 21% 1,271.96 - 1,007.20 31 - 25
Jun '18 11.75 vs. 8.90 26% 1,291.44 - 1,007.89 34 - 26
Mar '18 9.93 vs. 7.73 26% 1,187.45 - 984.00 33 - 27

Year (Dec.) Sales (Bil.) Per-Share Earnings* Per-Share Dividend 52-Week Price Range P/E Ratio Range
2018 $136.82 47.51 $0.00 $1,291.44 - $977.66 27 - 21
2017 110.86 35.90 0.00 1,086.49 - 796.89 30 - 22
2016 90.27 32.85 0.00 839.00 - 672.66 30 - 24
2015 74.99 24.34 0.00 798.69 - 490.91 33 - 20

Quadrix Scores
Overall Momentum Value Quality Financial Strength Earnings Estimates Performance
75 82 37 92 93 34 70

* Earnings exclude special items.
NA Not Available.
† Quadrix® scores are percentile ranks, with 100 the best.
e Dividend and yield estimated.

More Investment Newsletters and Services

Drip Investor

DRIP Investor — how you can buy dividend-paying stocks without a broker.

Visit us at DRIP Investor, your source for dividend reinvestment plans.

Lazy Investor

The Lazy Investor — free weekly e-letter that delivers market updates and stock market information via email.

Visit us at The Lazy Investor, our free investment newsletter.

Horizon Investment

Horizon — registered investment advisor seeks to provide investors at all stages the ability to build, preserve and enjoy wealth.

Visit us at Horizon Investment Services to get started in an investment program that's right for you.


Upside — discovers today's small and midcap stocks poised to be tomorrow's Blue Chip leaders.

Visit us at Upside, your guide to the best buys in small and midcap stocks.

Current Hotline

Friday, March 22, 2019

What a difference a few years can make

Read More from the Hotline

Stock Spotlight

Alphabet keeps cards close to vest

Wednesday, March 20, 2019

Alphabet ($1,202; GOOGL) produces operating momentum rare for a company of its size. Of the 30 largest stocks in the S&P 500 Index by market value, only Alphabet...

Read More from Stock Spotlight

Individual Stock Reports

ISRs make stock research easy!

Perhaps the most valuable two page reports available anywhere.

All the data you would normally have to plow through years of 10-K filings, earnings reports, and reams of market data to assemble — yours all in one concise report.

ISRs contain our proprietary Quadrix scores — find out how we rate all the stocks in the S&P 500.

Visit us at