Alphabet: Is Google Worth Your Dollars Anymore?

Google, or Alphabet (GOOG) (GOOGL), recently announced third quarter ended September 30, 2015 total revenue of $18.7 billion, up 13 percent year-over-year from $16.5 billion during the same period last year. Google, or Alphabet, also declared third quarter of 2015 non-GAAP net income of $5.1 billion or $7.35 of diluted earnings per share, an increase of 19 percent year-over-year from $4.3 billion or $6.25 of diluted earnings per share in the third quarter of 2014.

Impressive growth across the board

The key technology company reported continued year-over-year growth in both its top and bottom lines primarily due to notable revenue contribution of mobile search segment as well as solid revenue growths achieved from Programmatic Advertising and YouTube, adding significantly to the company’s overall top line growth.

Google, or Alphabet, is consistently delivering an increasing year-over-year top line growth with revenue growth by geography being almost constant over the years.
The company is able to demonstrate solid financial results primarily due to impressive growths across each of its major operational areas.

The internet giant is focused on optimizing its cost structure by continuously minimizing the traffic acquisition costs while steadily enhancing its bottom line growth.

Both, the company’s top and bottom lines grew impressively, allowed by solid growth across the mobile search business segment of Google, or Alphabet with the company having already introduced six innovative products which currently have over 1 billion users worldwide and further driving healthy customer traction.

Google, or Alphabet, is observed to be keen on controlling non-core costs and expenditures and driving sustainable and solid long-term top line growth. The adjusted costs and expenses as a percentage of revenue are maintained somewhat constant over the years with a consistent improvement in the top line.

The year-over-year adjusted cost and expenses for Google, or Alphabet have only grown nominally while these expenditures as a percentage of revenue have more or less remained constant. The constant currency year-over-year revenue for third quarter of 2015 using third quarter of 2014 rates have been primarily impacted by the adverse foreign exchange rates.

The aggregate paid clicks for third quarter of 2015 grew 23% year-over-year compared to the third quarter of 2014 and improved 6% sequentially over second quarter of 2015. Paid clicks on Google, or Alphabet websites for third quarter of 2015 grew 35% year-over-year compared to the third quarter of 2014 and enhanced 7% sequentially over second quarter of 2015. However, Paid clicks on Google, or Alphabet Network Members' websites for third quarter of 2015 declined 5% year-over-year compared to the third quarter of 2014 and remained same sequentially compared to second quarter of 2015.

However, aggregate cost-per-click declined 11% year-over-year compared to the third quarter of 2014 and fell 1% sequentially over the second quarter of 2015. Cost-per-click on Google, or Alphabet websites for the quarter declined 16% year-over-year compared to third quarter of 2014 and fell 2% sequentially over the second quarter of 2015. Cost-per-click on Google, or Alphabet Network Members' websites for third quarter of 2015 diminished 4% year-over-year compared to the same period last year. However, Cost-per-click on Google, or Alphabet Network Members' websites improved 1% sequentially over second quarter of 2015.

Conclusion

Overall, the investors are advised to purchase equity in Google, or Alphabet, Inc. considering its robust financial position with significant total cash of $70.91 billion against weaker total debt position of $8.50 billion only, encouraging the company to make future growth investments. The profit margin of 22.86% also seems impressive. The PEG ratio of 1.58 depicts healthy company growth and comparable to the industry’s growth average of 1.04. However, Google, or Alphabet is somewhat costly with trailing P/E and forward P/E ratios of 32.33 and 22.40 respectively and comparable to the industry’s average P/E of 36.22.
Published on Dec 8, 2015
By Yaggyaseni Mittra

Copyrighted 2016. Content published with author's permission.

Posted in ...