Investment Strategies / Falling Knives
No. of Recommendations: 8
These links have plots of Price/Sales versus forward one year, two year, and three year CAGR for GOOG:
1 year
https://www.dropbox.com/scl/fi/l4y2mg691o8p8do3bnv...2 year
https://www.dropbox.com/scl/fi/fje2cm5tisuy5pc04h2...3 year
https://www.dropbox.com/scl/fi/ol8lkdwrygkn38ojp4e...Price/Sales data is from macrotrends.com, from 2009-12-31 through 2025-03-05.
GOOG share price is at 165 as I type and TTM Revenue per Share as of Dec 2024 was 26.25 (per macrotrends), so the P/S stands today at 6.3
The forward CAGRs have been averaged following (somewhat) Jim's practice of removing endpoint price effects. I averaged over two months. For example, to compute a one year averaged forward CAGR I first compute all the CAGRs from dates two months (40 trading days) prior to the one year mark through two months after the one year mark, and average those CAGRs. Same process for 2 and 3 year averaged forward CAGRs. The colors in the plots denote dates, I may do something with that info later.
I'm sanguine about Alphabet's ability to adapt to the evolving search/AI landscape, and they're into other leading edge areas as well.
No. of Recommendations: 4
The plot legends are correct, but looks like I posted the links in order of 3 year CAGR, 2 year CAGR, and 1 year CAGR i.e. the reverse of what I typed into the post.
No. of Recommendations: 14
Just a small health warning...P/S has worked well for the firm in the past, but perhaps not as well in future.
It has been a more stable metric than earnings because their net margins have been somewhat variable, and the P/S multiples themselves have been lofty for a very long time for two pretty reasonable reasons: their net margins have been very high, and they have been growing very quickly.
With the capex program that they are looking at the net margins may be on a downtrend, so a move to valuing on a multiple of earnings (or smoothed earnings) may start to work better. This was always going to be the endpoint of their growth journey, so it's a matter of deciding if now is the time to make the switch.
Jim
No. of Recommendations: 3
With the capex program that they are looking at the net margins may be on a downtrend, so a move to valuing on a multiple of earnings (or smoothed earnings) may start to work better. This was always going to be the endpoint of their growth journey, so it's a matter of deciding if now is the time to make the switch.
Actually this is why I tend to use a "smoothed" average of Price to Earnings and Price to Sales, they seem to be able (historically) adjust margins almost at will, and when they are in heavy CapEx mode the stock will look expensive on a PE basis (but stable on a PS basis).
tecmo
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No. of Recommendations: 5
P/S has worked well for the firm in the past, but perhaps not as well in future...so a move to valuing on a multiple of earnings (or smoothed earnings) may start to work better.
FYI,
Comment of mine as GOOG came up on another board (GOOGL at $152.60 when I wrote it):
certainly doesn't trade for less than 20 times trailing earnings very often.
Very briefly in the credit crunch. Some stretches in 2011-2012. A while late 2022 to very early 2023. That's about it for the last 20 years.
Though one might want to wear a seatbelt during any potential turbulence, I find it very hard to imagine a bad long term outcome from here.
Note, GOOGL is worth a hair more than GOOG but costs a hair less.
Jim
No. of Recommendations: 2
( think my previous post got lost)
For posterity
GOOG : $155
BRK : $530
I fully expect GOOG to outperform over the next 2-3 years.
tecmo
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No. of Recommendations: 2
A slightly different metric, price to sales.
They are very likely to report Revenue of $88B (probably even higher) for the quarter, which would be $357B on a TTM basis. It is very rare for them to trade below 5x that number... $1,785B , roughly 5% below current levels (~$150 / share).
tecmo
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No. of Recommendations: 0
No. of Recommendations: 3
"Note, GOOGL is worth a hair more than GOOG but costs a hair less."
Is the "worth a hair more" due to the voting rights, or is there something more fundamental than that?
Thank you,
BHH
