Can Google Continue Delivering Results?

Google, or Alphabet, (GOOG) (GOOGL) posted solid results for the third quarter, 2015. The quarter posts increase of 13% in revenue on year-over-year basis to $18.67 billion from $16.53 billion for the third quarter, 2014, driven by the mobile research revenue, along with you tube contributions, and its programmatic business.

Impressive growth all across

Moving forward to expenses, the total cost of revenue scaled up to $7.0 billion from $6.6 billion for the third quarter, 2014 as a result of the increase in traffic acquisition cost and other cost of revenue.
The traffic acquisition costs went up to $3.5 billion from $3.3 billion for the third quarter, previous year, driven by increase in cost related to Google, or Alphabet, network members and distribution partners. The other cost of revenue went up to $3.47 billion from $3.34 billion for the third quarter, previous year. Additionally, the costs of revenue as a percentage of revenue skidded to 37.7% from 40.5% for the third quarter, 2014.

The total Non-GAAP costs and expenses scaled up to $12.5 billion from $11.2 billion for the third quarter, 2014, driven by the increase in General and Administrative expenses to $1.2 billion from $1.1 billion for the third quarter, previous year, by the increase in Sales and Marketing expenses to $1.9 billion from $1.8 billion for the third quarter, 2014, by the increase in Research and Development expenses to $2.5 billion from $1.9 billion for the third quarter, previous year, and by the increase in Cost of Revenues to $6.8 billion from $6.1 billion for the third quarter, last year.

Further, the Non-GAAP operating income scaled up to $6.1 billion from $5.3 billion for the third quarter, 2014. Also, the operating margin went up to 33% from 32% for the third quarter, previous year.

The net income for the quarter rose to $5.1 billion from $4.3 billion for the third quarter, 2014. Google, or Alphabet, posted Diluted Earnings per share $7.35 up from $6.25 for the same quarter, previous year.

Segments are growing impressively

The revenue from Google, or Alphabet, Websites went up to $13 billion from $11 billion for the third quarter, 2014. The revenue from Google, or Alphabet, network members’ website increased to $3.6 billion from $3.5 billion for the third quarter, previous year, which consists of AdSense, AdExchange, AdMob, the revenue from Dublele Click Bid Manager. Further the other revenues grew from $1.9 billion from $1.7 billion for the third quarter, 2014, driven by the growth of the sales of its digital content products which are a part of its Google, or Alphabet, Play Store, primarily Google, or Alphabet, for work and apps, including Cloud Platform.

The revenue from United States increased to 47% from 44% for the last year’s same quarter. The revenue from United Kingdom was stable at 10% from the third quarter, 2014. The revenue from Rest of the World fell to 43% from 46% for the third quarter, last year.

Cash flow and valuation

The Cash flow from operating activities went up to $19.6 billion for the nine-month period, 2015 from $16.0 billion for the same period, previous year. The cash flow in investing activities scaled up to $18 billion for the nine month period, 2015 from $17.8 billion for the same period, 2014 and the cash flow in financing activities increased to $1.3 billion for the nine-month period, 2015 from $1.1 billion for the same period, last year. Furthermore, the cash and cash equivalents at the end of the nine month period, 2015 rose to $18.1 billion from $15.6 billion for the same period, previous year.

Google, or Alphabet, has trailing P/E ratio of 31.63 and forward P/E ratio of 21.91, showing company’s rapid growth. The company further has PEG ratio of 1.55, showing that the company will be paying less for its future growth earnings. The company has Price/Sales ratio of 7.17 and Enterprise Value/Revenue of 6.32. The current ratio went up to 4.77 for the nine-month ending period, 2015 from 4.75 for the twelve month ending period, 2014.

Conclusion

To wrap up, the performance of Google, or Alphabet, in the Third quarter, 2015 was solid. The quarter posted increased revenue, operating income and net income from the third quarter, last year. The Diluted Earnings per share scaled up to $7.34 from $6.25 for the same quarter, last year. The forward P/E ratio of the company indicated the company’s future growth. The company has PEG ratio of 1.55.
Published on Dec 16, 2015
By Yaggyaseni Mittra

Copyrighted 2016. Content published with author's permission.

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