Top Picks 2018: Alphabet (GOOGL)
01/23/2018 5:00 am EST
Stocks on our Focus List average Quadrix scores of 80 for Momentum (growth rates for periods of up to one year and some profit-estimate related metrics) and 92 for Quality (long-term growth rates and returns on assets, investment, and equity).
Alphabet (GOOGL) exceeds the industry average for four key variables. The company has put on a growth clinic for more than a decade. In the last 40 quarters, the company has never failed to deliver year-to-year sales growth.
During that period, quarterly per-share profits fell just five times and operating cash flow just three times. Despite Alphabet’s huge size, it continues to grow like a young company, managing six consecutive quarters of at least 20% gains in sales.
The technology sector seems reasonably valued versus its own historical norms from multiple angles. The average technology stock has exceeded its current trailing P/E ratio in 36% of months since 1994, indicating the sector remains well below previous extremes.
The consensus projects sales growth of 22% this year and 19% next year. Alphabet doesn’t look overly expensive — when you take its growth into account. At 28 times trailing earnings, Alphabet trades roughly in line with the industry average.