Is Trending Stock Alphabet Inc. (GOOGL) a buy it now?
Alphabet (GOOGL) recently made it to Zacks.com’s Most Wanted Stock list. Therefore, you may want to consider some of the key factors that may influence the stock’s performance in the near future.
Shares of this internet search leader have returned -7.4% over the past month compared to the -8.3% change in the Zacks S&P 500 composite. Alphabet, lost 5.6% over this period. Now the key question is: where could the stock be heading in the near term?
Although press releases or rumors about a substantial change in a company’s trading outlook will usually “trend” its stock and cause an immediate price change, there are always fundamental facts that ultimately dominate the take. purchase and retention decision.
Revisions to earnings estimates
Rather than focusing on anything else, at Zacks we prioritize assessing change in a company’s earnings projection. Indeed, we believe that the fair value of its shares is determined by the present value of its future earnings streams.
We basically look at how sell-side analysts covering the stock are revising their earnings estimates to reflect the impact of the latest trading trends. And if earnings estimates increase for a company, the fair value of its shares increases. A higher fair value than the current market price stimulates investors’ interest in buying the stock, causing its price to rise. This is why empirical research shows a strong correlation between trends in earnings estimate revisions and short-term stock price movements.
Alphabet is expected to post earnings of $25.09 per share for the current quarter, representing a year-over-year change of -8%. Over the past 30 days, the Zacks consensus estimate has changed by -1.2%.
The consensus earnings estimate of $110.62 for the current fiscal year indicates a -1.4% year-over-year change. This estimate has changed by -1.2% over the last 30 days.
For the next fiscal year, the consensus earnings estimate of $129.98 indicates a change of +17.5% from what Alphabet is expected to report a year ago. Over the past month, the estimate has changed by -1.6%.
With a strong externally audited track record, our proprietary stock rating tool, Zacks Rank, provides a more conclusive picture of a stock’s price direction in the short term, as it effectively harnesses the power of earnings estimate revisions. . Due to the magnitude of the recent consensus estimate change, along with three other factors related to earnings estimates, Alphabet is ranked Zacks Rank #4 (sell).
The chart below shows the evolution of the company’s consensus 12-month EPS estimate:
12 month EPS
Revenue Growth Forecasts
While a company’s earnings growth is arguably the best indicator of its financial health, nothing happens if it can’t grow its revenue. It is almost impossible for a company to increase its profits without increasing its revenue for long periods of time. Therefore, knowing the potential revenue growth of a business is crucial.
For Alphabet, the consensus sales estimate for the current quarter of $58.01 billion indicates a year-over-year change of +13.9%. For the current and future fiscal years, the estimates of $245.4 billion and $282.29 billion indicate variations of +15.7% and +15%, respectively.
Latest reported results and history of surprises
Alphabet posted revenue of $56.02 billion in the last quarter, representing a year-over-year change of +22.9%. EPS of $24.62 for the same period versus $26.29 a year ago.
Compared to the Zacks consensus estimate of $56.17 billion, reported revenue is a surprise of -0.27%. The EPS surprise was -4.2%.
In the past four quarters, Alphabet has exceeded consensus EPS estimates three times. The company has exceeded consensus revenue estimates three times during this period.
No investment decision can be effective without considering the valuation of a stock. Whether a stock’s current price accurately reflects the intrinsic value of the underlying business and the company’s growth prospects is a key determinant of its future price performance.
While comparing the current values of a company’s valuation multiples, such as the price-to-earnings (P/E) ratio, the price-to-sales (P/S) ratio, and the price-to-cash flow (P/CF) ratio , along with its own historical values help determine whether its stock is fairly valued, overvalued or undervalued, comparing the company against its peers on these metrics gives a good idea of the reasonableness of the stock price .
As part of the Zacks Style Scores system, the Zacks Value Style Score (which assesses both traditional and unconventional valuation metrics) organizes stocks into five groups ranging from A to F (A is better than B; B is better than C; and so on.), which is useful in determining whether a stock is overvalued, correctly valued, or temporarily undervalued.
Alphabet is rated C on this front, indicating that it trades at par with its peers. Click here to see values for some of the rating metrics that led to this rating.
The facts discussed here and plenty of other Zacks.com information might help determine whether or not it’s worth paying attention to the market buzz about Alphabet. However, its Zacks No. 4 ranking suggests it may underperform the broader market in the near term.
Zacks names ‘only one best choice for doubling up’
From thousands of stocks, 5 Zacks experts have each picked their favorite to skyrocket by +100% or more in the coming months. Of these 5, Research Director Sheraz Mian selects one to have the most explosive advantage of all.
It’s a little-known chemical company that’s up 65% year-on-year, but still very cheap. With relentless demand, rising earnings estimates for 2022 and $1.5 billion for stock buybacks, retail investors could jump in at any moment.
This company could rival or surpass other recent Zacks stocks which are expected to double, such as Boston Beer Company which jumped +143.0% in just over 9 months and NVIDIA which jumped +175.9% in one. year.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.