alphabet (Google – Free Report) is one of the most searched stocks on Zacks.com these days. So it's worth looking at some facts that could shape the stock's performance in the short term.
Over the past month, the Internet search leader's stock has seen an increase of +5%. In comparison, the Zacks S&P 500 composite index was -1.1% volatile. During this period, the Zacks Internet Services industry, which includes Alphabet, gained 7.8%. The key question here is: What is the future direction of the stock price?
While media releases and rumors about significant changes in a company's business prospects typically cause its stock to “trend” and lead to immediate price movements, there are some fundamentals that ultimately govern buy-and-hold decisions. There are always facts.
Regarding revisions to performance forecasts
Zacks prioritizes evaluating changes in a company's future earnings expectations above all else. That's because we believe that the present value of future income streams determines the fair value of a stock.
Essentially, we look at how the sell-side analysts covering a stock are revising their earnings estimates to reflect the impact of the latest business trends. And as a company's earnings expectations rise, so does the fair value of its stock. If the fair value is higher than the current market price, investors will be more willing to buy the stock, causing the price to rise. This is why empirical research shows a strong correlation between trends in earnings estimate revisions and short-term stock price movements.
For the current quarter, Alphabet is expected to post earnings of $1.49 per share, representing a year-over-year change of +27.4%. The Zacks Consensus Estimate has changed +0% over the past 30 days.
The current year's consensus earnings estimate of $6.78 represents a +16.9% change from the prior year. Over the past 30 days, this estimate has changed by +0.1%.
Next year's consensus earnings estimate of $7.76 represents a +14.5% change from what Alphabet was expected to report a year ago. Over the past month, the forecast has changed by +0.1%.
The Zacks Rank, a proprietary stock evaluation tool with a strong, outside-audited track record, effectively harnesses the power of earnings estimate revisions to deliver a more definitive picture about near-term stock price direction. We provide. The magnitude of the recent change to the consensus estimate, along with three other factors related to the earnings estimate, gives Alphabet a Zacks Rank #3 (Hold).
The chart below shows the evolution of the company's consensus EPS estimate for the next 12 months.
12 months EPS
Revenue growth forecast
There's no question that a company's profit growth is the best indicator of its financial health, but nothing will happen if it doesn't make a profit. It's nearly impossible for a company to grow its revenue without growing its revenue over the long term. Therefore, it's important to know a company's earnings growth potential.
For Alphabet, the consensus revenue estimate for the current quarter is $66 billion, representing a +13.7% year-over-year change. Estimates for the current and next fiscal year are $290.25 billion and $322.34 billion, representing changes of +13.2% and +11.1%, respectively.
Last reported results and surprising details
Alphabet reported revenue of $72.32 billion in its last reported quarter. This represents a +14.6% year-over-year change. EPS for the same period was $1.64, compared to $1.05 a year ago.
The reported earnings represent a surprise of +2.19% when compared to the Zacks Consensus Estimate of $70.77 billion. EPS surprise was +2.5%.
The company beat consensus EPS estimates in each of the trailing four quarters. The company has surpassed consensus revenue estimates every time during this period.
evaluation
You cannot make efficient investment decisions without considering stock valuation. 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 future stock performance.
The present value of a company's valuation multiples, such as price-to-earnings (P/E), price-to-sales (P/S), and price-to-cash flow (P/CF), and the past value of your company Comparing a company to its peers based on these parameters will help you see how reasonable its stock price is. You can get to know better.
Zacks Value Style Score (part of the Zacks Style Scores system). We pay close attention to both traditional and unconventional metrics to rate stocks from A to F (A is better than B, B is better than C, and A is better than B). B is better than C, etc.) and can be very helpful in identifying whether a stock is overvalued, properly valued, or temporarily undervalued.
Alphabet is rated D on this score, indicating that it trades at a premium relative to its peers. Click here to see the values of some of the metrics that determined this grade.
conclusion
The facts discussed here, and much of the other information on Zacks.com, may help you decide whether the market buzz surrounding Alphabet is worth paying attention to. However, the company's Zacks Rank #3 suggests it could outperform the broader market in the near term.
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