ALPHABET INC-CL C (NASDAQ:GOOG) - A Strong Candidate for GARP Investors

ALPHABET INC-CL C (NASDAQ:GOOG) stands out as a compelling pick for investors seeking growth at a reasonable price (GARP). The company meets key criteria from Peter Lynch’s investment strategy, balancing strong growth, profitability, and a reasonable valuation. Below, we examine why GOOG fits this approach.

Growth and Valuation

• EPS Growth: Over the past five years, GOOG has delivered an average annual EPS growth of 25.25%, well above the 15% threshold Lynch favors.
• PEG Ratio: At 0.85, the stock trades below the ideal PEG of 1, indicating it is reasonably priced relative to its growth.
• Future Growth: Analysts expect earnings to grow at 15.52% annually, reinforcing its sustainable growth trajectory.

Financial Health

• Debt/Equity: A low ratio of 0.04 suggests minimal reliance on debt, aligning with Lynch’s preference for financially stable companies.
• Current Ratio: At 1.77, GOOG comfortably covers short-term obligations, signaling strong liquidity.
• Return on Equity (ROE): An impressive 32.15% reflects efficient use of shareholder capital.

Profitability and Industry Position

GOOG’s fundamentals are robust, with:

• A profit margin of 30.86%, outperforming 92.96% of its peers.
• An operating margin of 33.15%, ranking in the top 5% of its industry.
• A return on invested capital (ROIC) of 26.71%, highlighting effective capital allocation.

Verdict for GARP Investors

GOOG combines steady growth, financial strength, and reasonable valuation—key traits for long-term investors. While its P/E ratio of 21.35 may seem elevated, the PEG ratio and strong profitability justify the premium.

For more details, review the full fundamental analysis of GOOG.

Our Peter Lynch Strategy screener lists more stocks that fit this strategy and is updated daily.

Disclaimer

This is not investing advice. Always conduct your own research before making investment decisions.