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

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

Why GOOG Fits the GARP Strategy

• Earnings Growth: Over the past five years, GOOG has delivered an average annual EPS growth of 25.25%, well within Lynch’s preferred range of 15-30%. This signals sustainable expansion rather than overheated growth.
• Attractive Valuation: With a PEG ratio (past 5 years) of 0.90, the stock is priced reasonably relative to its growth. A PEG below 1 suggests the market may be undervaluing its future earnings potential.
• Strong Profitability: The company’s return on equity (ROE) of 32.15% far exceeds Lynch’s 15% threshold, reflecting efficient use of shareholder capital.
• Healthy Balance Sheet: GOOG maintains a low debt-to-equity ratio of 0.04, indicating minimal reliance on borrowing. Its current ratio of 1.77 also demonstrates solid liquidity.

Fundamental Strengths

GOOG’s financial health is further supported by high margins, consistent cash flow, and improving efficiency. The company outperforms most peers in profitability metrics like operating margin (33.15%) and return on invested capital (26.71%). While its P/E ratio of 22.79 may seem elevated, the PEG ratio and forward earnings outlook justify the valuation.

For a deeper dive, review the full fundamental analysis of GOOG.

Our Peter Lynch Strategy screener lists more stocks that align with this strategy.

Disclaimer

This is not investing advice. The observations here are based on data available at the time of writing. Always conduct your own research before making investment decisions.