Google: The Turning Point… | GOOGL Stock | Invested

Google stock | GOOGL stock has experienced continued volatility, correlated with a variety of growth oriented risk factors across the market more broadly…

Google stock did symbol g-o-o-g-l or g-o-o-g depending on what you like but either way you look at it this company hasn’t been doing very well six-month returns of negative 20.34 year-to-date now down 21.45 one day returns have been positive mildly positive 0.11 percent in fact over the past five days actually up 8.47 so a healthy rebound gaining some steam coming

Back with the market more broadly over the past week but if we zoom out it just gets worse and worse and worse as i showed you year-to-date now down 21.45 percent it’s listed a lot of investors a lot of investors have been left underwhelmed a lot investors disappointed with how google has been faring over the past few months because google for so many years has

Been sold as one of the single most stable certain equities within the marketplace and yet it’s been exhibiting under performance down 23.99 percent from its high naturally investors getting frustrated they’re seeing the situation seeing the constant declines in the marketplace and thinking well is it really worth it is it really worth the money is really worth

Holding onto google stock at this time well i think all the answers you need all the reassurance you need comes from the numbers comes from the underlying fundamentals of this company yes we have been seeing pain yes over the past few months we have continued to see declines one month returns negative two point three one percent six month returns of negative twenty

Point three four percent it has not been an easy journey but think about the market more broadly think about what’s been happening think about the type of stocks that have been absolutely bashed down by this marketplace anything with a large degree of growth predication anything with forward-looking growth assumptions that’s exactly what google has what you need

To evaluate as an investor looking at the fundamentals look at the secular trends prevailing around the business is how likely is it that the growth associated with google going forward is going to take place answer that answer that question my answer is with a high degree of certainty i believe given the secular trends around this company given the underlying

Quality of which management not to mention the outstanding fundamental characteristics of this company we’re talking a cash to debt ratio of 4.71 equity assets of 0.71 and 0.11 debt to equity debt to ebitda of 0.28 all these numbers they’re simply outstanding they’re indicative of not only a phenomenally well-entrenched company in the present with a lot of financial

Stability but going for the next 10 15 20 years set up to thrive just as much if not more that cash debt ratio means instantaneously all the deal obligations could be paid off four times over and then they still have mountains of cash on hand to reinvest and build out their business going forward when people say google is a behemoth that it’s a a giant not only

In big tech but i can but in business more broadly they’re not lying the numbers tell the truth and in this irrational marketplace in this doubtful marketplace where we continue to see declines across even some of the single highest quality equities within the marketplace it’s not the time to bind out it’s not the time to buy into emotional rationality what is

See also  My 2020 Crypto Investment Plan - Bitcoin, Ripple XRP & Ethereum

The time to do is to bind to the realistic numbers to buy into the realistic factors around the company so many investors i’ve seen backing out the marketplace leaving their positions selling stocks even like google and microsoft because they believe it’s just not the time to be investing too much volatility too much doubt within the marketplace and yet if you

Actually analyze these companies actually look at these businesses on a fundamental level relative to the price at which they’re trading there has never been a better time to buy yes there is doubt yes there is fear yes we have seen evident volatility within the the market price the price movements of these equities it’s going to clear out the people who aren’t who

Don’t have courage quite frankly the investors who aren’t brave enough to endure this volatility but the ones who can the ones who can make it through this volatile period within the market who can endure these type of declines the rewards the raws will be massive just look at the numbers underlying financial stability obviously is there but it’s complemented by

Underlying profitability as well net margins of 27.57 operating margins of 30.47 both of which on both a historical and industry basis are at the very highest they have ever been gross margins admittedly not as high gross margins have seen declines over the past few years but look at the size of this business a 1.5 trillion dollar company naturally you’re going

To see declines in terms of gross margins over time but going forward the secular trends remain just as positive and already look at the massive amounts of margin accretion taking place between gross margins and net margins usually when you’d have a company with 56.93 gross margins you’d be seeing around 10 to 15 percent gross margin accretion and yet google’s

Doing well in excess of that net margins of 27.57 accounting for a larger degree a far large degree of the constant gross margins accreting from this company so profitability is evident we’ve got a very low capital cost business model with a lot of margin accretion taking place we have evident financial stability and we have evidently extremely high returns on

Equity returns an equity of 30.6 again on historical and an industry basis the very best this company has ever achieved so going forward what does that tell you tells you number one not only is the underlying nature of this business of an extremely high quality but also the managerial competency the people actually running this business they know exactly what

They’re doing they know how to look at capital they know how to make long run returns invest for the long term with this company that that’s the reality of google right now over long term it continues to be a beast it continues to thrive it continues to invest for the long term so profitability is there financial stability is there everything we’re after on a

See also  INVESTMENT ANALYST Interview Questions and Answers! (How to PASS an Investment Analyst Interview!)

Fundamental level is present within this company and to round it all off look at the valuation the valuation on google right now relative not only to the rest of big tech but across the market more broadly i believe is the single greatest risk to award ratio out of any company within the market more broadly because have a look at this a p e ratio of 20.58 a

Ford p e of 20.25 and you may argue well you know lucky a company like intel can be like micron technology stock does have lower pes yes i acknowledge that but think about the growth taking place a p e of only 20.58 relative two a three year even a growth rate of thirty four point six percent a three year earnings per share growth through 36.9 three-year free

Cash flow growth rate and it’s insane of 45 revenue growth has been consistent at 25 over the past three years think about those growth numbers those are the same growth numbers as someone being post like being posted by someone like nvidia someone like amd these massive accelerating growth companies and yet google just isn’t interpreted like that and when you

Look at the numbers you know what’s actually taking place within the business that’s absolutely insane relative to that ford pe relative that current pe it is just unbelievable the degree of undervaluation prevalent within this company and if you break it down even more if you get into even more detail in the underlying nature of this company it becomes ever

More present even more apparent the degree of undervaluation taking place especially on the day we’ve seen continued declines one month returns negative i believe it’s three percent down or 2.31 not as bad but still use them out it’s not a pretty sight to see it continues to decline and we had a slight uptick over the past five days up 8.41 so naturally people are

Saying you know lucky after this uptick after this rebound in price slightly is it still a buying opportunity present is there still a chance to get into google stock and appealing valuation the answer when i show these numbers i think is fairly easily fairly definitively a very direct yes let me show you we break it down on the day even after the rebound and price

We’ve seen around eight percent over the past five days all you need to price in in terms of tangible growth going for the next decade it’s a growth rate of 11.13 you price that in growth of 11.13 going for the next decade discount rate of nine percent earnings per share figure of a hundred and ten dollars and fifty six cents a share look at that price tag of two

Thousand two hundred and seventy seven and forty two cents relative to the current trading price current trading price of virtually the same just a 40 cent difference there it’s easy to see even with the growth rate of 11 which by the way this is the same company that was doing free cash flow growth of 45 over the past three years with growth of only 11 over the

See also  Google: The Story Has Changed | GOOGL Stock | Invested

Next decade you’re getting fair value for your money and you may argue quite aptly so what about a higher growth rate we’ve seen this company executing on massive growth over the past 3 5 10 years what if we put in growth rates like that those higher growth rates instead of this very conservative 11 figure what happens then well let me show you over the past 10

Years by the way they’ve grown at 19 5 year growth of 35.5 one year growth of 47.2 percent and that’s just on earnings per share basis these numbers are creeped down to revenue they create down to operating income ebitda free cash flow all these numbers simply sensational so let’s up that growth rate let’s get more aggressive with that growth rate what i’ve been

Pricing on google is around 17 18 growth going for the next decade because i’m in a good mood let’s up it to 18 let’s say over the next decade given the secular trends around the skip business given the potential for continued growth going forward the increasing prevalence of youtube of waymo of their core ads business and their other bet segment let’s say they

Can execute on that 18 growth going for the next decade given the evidently high quality nature of the company i’m comfortable with a discount rate of nine percent i have used ten percent in the past but given the quality of this business given the profitability the financial stability the certainty associated with this company you know i’m satisfied with that i

Have no concern with a nine percent discount rate relative to what’s taking place with the market more broadly so let’s input that 18 growth rate going for the next decade 90 discount rate current earnings per share figure of 110 and 56 cents a share look at that fair value fair value of hundred and sixty 3660. and thirty four cents a margin of safety of thirty

Seven point seven seven percent this is a massive opportunity massive undervaluation evident within this company this is for me right now the single greatest risk to reward bet within the market more broadly my certainty my conviction with this company is unwavering very very fond of google as a long-term investment so of course conduct your research before you

Make any moves in the marketplace look into google and its fundamentals before you make any moves with google or or otherwise but if you enjoyed this video how do you learn something more about my current thoughts on google alphabet stock relative to the market more broadly then please drop us a like down below hit subscribe if you haven’t already if there’s a

Company or topic you want me to talk about in the next video then please just comment down below we’d love to hear your thoughts until then thank you i’ll see in the next one

Transcribed from video
Google: The Turning Point… | GOOGL Stock | Invested By Invested