Alphabet Inc. (NASDAQ:GOOGL) recently broke through the $1-trillion mark in market cap, joining tech giants Apple Inc. (NASDAQ:AAPL) and Microsoft Corporation (NASDAQ:MSFT) in the very exclusive club. However, with valuations of many stocks through the roof these days, investors may be asking themselves whether Alphabet is a good value buy.
At $1 trillion, Alphabet currently trades at a little less than 32 times its earnings and more than five times its book value. Those aren’t cheap multiples by any stretch. And although Alphabet is still growing its sales at 20%, it may still be a bit too pricey to buy today. Price-to-earnings growth, PEG, factors in the company’s expected future earnings into its calculations and Alphabet has a multiple of just over two. Typically, good growth stocks have PEG ratios of one or less, and Alphabet is not near that today.
Trading near its 52-week high, there’s a lot riding on Alphabet’s next earnings report, which is expected to be released early next month.
Ultimately, how it does in its year-end results will determine which direction the stock will go from here on out. Investors are already wary of valuations being as high as they are and a lot will have to go right for Alphabet to be able to not only justify its valuation, but to get investors to keep buying the stock at these levels.
At its current valuation, Alphabet is simply too rich of a stock to buy today and investors may be better off looking for better value buys to invest in.
