Alphabet has been treading water for the past six months, recording a small return of 2.2% while holding steady at $165.80.
Is now the time to buy GOOGL? Find out in our full research report, it’s free.
Why Is Alphabet a Good Business?
Started by Stanford students Larry Page and Sergey Brin in a Menlo Park garage, Alphabet (NASDAQ: GOOGL) is the parent company of the eponymous Google Search engine, Google Cloud Platform, and YouTube.
1. Skyrocketing Revenue Shows Strong Momentum
Alphabet shows that fast growth and massive scale can coexist despite the conventional wisdom about the law of large numbers. The company’s revenue base of $161.8 billion five years ago has more than doubled to $350 billion in the last year, translating into an incredible 16.7% annualized growth rate.
Over the same period, Alphabet’s big tech peers Amazon, Microsoft, and Apple put up annualized growth rates of 17.9%, 14.3%, and 8.1%, respectively. 
2. Operating Margin Reveals a Well-Run Organization
Operating margin is the key profitability measure for Alphabet. It’s the portion of revenue left after accounting for all operating expenses – everything from the IT infrastructure powering online searches to product development and administrative expenses.
Alphabet has been a well-oiled machine over the last five years. It demonstrated elite profitability for a consumer internet business, boasting an average operating margin of 28.4%. A closer examination is required, however, because the company’s individual business lines have very different margin profiles.
3. Outstanding Long-Term EPS Growth
We track the long-term change in earnings per share (EPS) because it shows whether a company’s growth is profitable. It also explains how taxes and interest expenses affect the bottom line.
Alphabet’s EPS grew at an astounding 25.6% compounded annual growth rate over the last five years, higher than its 16.7% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
Final Judgment
These are just a few reasons why Alphabet ranks highly on our list, but at $165.80 per share (or 18.3× forward price-to-earnings), is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
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