Alphebet (Google) Financial Report and Financial Analysis: 2015 to 2019

Alphabet Financial Report and Financial Analysis started with an in-depth review of Alphabet's 10k Annual report, specifically, Alphabet's income statement and balance sheet. 

Next Paul Borosky, MBA., summarized their financial information and input it into a proprietary financial model, which shows their income statement and balance sheet trends as well as calculations for Google's financial ratios, and financial ratio trends covering 5 years. 

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Alphabet Financial Report and Analysis by Paul Borosky, MBA.
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Each Public Company Financial Report will include:

  • Summarized income statement for the last 5 years.
  • Summarized balance sheet for the last 5 years.
  • Summary analysis by myself of important income statement, balance sheet, and financial ratio trends and other happenings.
  • Five year’s worth of over twenty common financial ratios presented with formulas, calculations, and analysis tips for each ratio.
  • Line by line description, explanation, and analysis tip for most financial statement line items and financial ratios.
  • Professional financial analysis tips provided in each section to help YOU conduct your OWN financial analysis!
  • Each section includes an “in other words” segment.  This is were the researcher uses plain English to explain finance concepts.

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Alphabet (Googe) Summary

Alphabet stock price started in February of 2019 at $1,110.  It ended the 365 day period with a stock price of $1,515.60.  This is a growth rate annually of 36.54%.  From an investor’s perspective, this growth rate well exceeds overall market returns.

Alphabet has not paid out dividends in the last five years.  The zero dividend payment policy may be due to the company’s need for internal growth.  However, over the next several years, investors should expect some type of dividends to be paid once the organization reaches the mature phase of their business cycle. 

Alphabet Income Statement Summary

Cost of Goods Sold

The company’s cost of goods averages approximately 26% of revenues over the last five years.  The company’s cost of goods fell from 30.6% in 2018 to 20.7% in 2019.  This shows that the firm is taking steps to reduce the costs of business.  As the organization further enters his maturity phase of its business cycle, cost-cutting such as this should be expected throughout the organization. 

Alphabet 2019 Income Statement

Column1 2019 2018 2017 2016 2015
Revenues                  161,857            136,819            110,855              90,272               74,989
COGS                    71,896              59,549              45,583              35,138               28,164
Gross Profit              89,961              77,270              65,272              55,134               46,825
SG&A                    35,569              24,459              19,765              17,470               15,183
Depreciation                            -                    -                    -                    -                     -
R & D                    26,018              21,419              16,625              13,948               12,282
Other                            -                    -                    -                    -                     -
Operating Expenses                  127,626            110,498              84,709              66,556               55,629
EBIT                    34,231              26,321              26,146              23,716               19,360
Other Income                      5,395                8,592                1,047                  434                   291
Interest Expense                         585                6,827                4,377                  124                   104
EBT                    39,625              34,913              27,193              24,150               18,965
Taxes                      5,282                4,177              14,531                4,672                 3,303
Net Income                   34,343            30,736            12,662            19,478             16,348
Tax Rate 13.3% 12.0% 53.4% 19.3% 17.4%

Alphabet Balance Sheet Summary

Inventory

Alphabet’s inventory fell from $1.1 billion in $2018 to $1 billion in 2019.  The slight reduction in inventory may not mean much from an investor’s perspective.  If this trend continues, then it may indicate the company is moving away from its electronic division and focusing more on its search engine and advertising departments.  A downfall for the strategy is that they are not diversifying their revenue streams.  A benefit of this possible strategy would be that they are focusing more on their core competencies.

Alphabet 2019 Summary Balance Sheet

Column1 2019 2018 2017 2016 2015
Cash                      18,498            16,701            10,715            12,918            16,549
Short Term Investment                    101,177            92,439            91,156            73,415            56,517
Account Receivable                      25,326            20,838            18,336            14,137            11,556
Inventory                           999              1,107                749                268                491
Other                        4,412              4,236              2,983                  -                  -
Current Assets                  152,578        135,676        124,308        105,408          90,114
Net PPE                      73,646            59,719            42,383            34,234            29,016
Goodwill                      20,624            17,888            16,747            16,468            15,869
Other                        2,342              2,693              2,672                  -                  -
Total Assets                  275,909        232,792        197,295        167,497        147,461
Accounts Payable                        5,561              4,378              3,137              2,041              1,931
Accrued Expense                      31,562            26,142            18,733            13,062            10,636
Accrued Taxes                           274                  69                881                554                302
Notes Payable                              -                  -                  -                  -              3,225
LT Debt - Current                              -                  -                  -                  -                  -
Other                              -                  -                  -                  -                  -
Total Current Liabilities                      45,221            34,620            24,183            16,756            19,310
LT Debt                        4,554              4,012              3,969              3,935              1,995
Other                        2,534              3,545              3,059              2,665              1,822
Total Liabilities                    74,467          55,164          44,793          28,461          27,130
Common Stock                      50,552            45,049            40,247            36,307            32,982
Treasury                              -                  -                  -                  -                  -
Retained Earnings                    152,122          134,885          113,247          105,131            89,223
Other                              -                  -                  -                  -                  -
Total Equity                  201,442        177,628        152,502        139,036        120,331
Total Equity & Liability                  275,909        232,792        197,295        167,497        147,461

Alphabet Financial Ratio Summary and Analysis

Quick Ratio

Because Alphabet does not maintain a significant portion of their current assets in inventory, the quick ratio is almost directly correlated with the current ratio.  In other words, as the current ratio falls, so does the quick ratio.

Fixed Asset Turnover

The organization’s fixed asset turnover fell from 2.58 in 2015 to 2.2 in 2019.  This indicates that the company may have excess property, plant, and or equipment.  An excellent strategy in this situation is to divest or sell some of the hard assets for liquid currency.  Unless, the company may have taken on the additional fixed assets in hopes of future growth. Which may be the case in the situation.  From this, investors should play a wait-and-see strategy in relation to whether the firm better utilizes its fixed assets over the next several years.

Net Profit Margin

Alphabet's net profit margin fluctuated between 11.4% in 2017 to 21.8% in 2015.  In 2019, the net profit margin was 21.2%.  On the positive side, the company has generated profits over the last five years.  Unfortunately, the company’s profit margin has not been consistent similar to its other ratios.  This indicates that the company has had some unique internal or external events that impacted their bottom line.  Because the firm is one of the largest in the world, investors should expect this type of fluctuation on occasions.

Alphabet (Google) Liquidity Ratios

Ratios 2019 2018 2017 2016 2015
Current Ratio                           3.37                    3.92
Cash Ratio                           0.41                    0.48
Quick Ratio                           3.35                    3.89
Net Working Capital                         7,426                  8,057

Alphabet (Google) Asset Utilization

Ratios 2019 2018 2017 2016 2015
Total Asset Turnover                           0.59                    0.59
Fixed Asset Turnover                           2.20                    2.29
Days Sales Outstanding                         57.11                  55.59
Inventory Turnover                       162.02                123.59
Accounts Receivable Turnover                           6.39                    6.57
Working Capital Turnover                         21.80                  16.98
AP Turnover                         29.11                  31.25
Average Days Inventory                           0.44                    0.34
Average Days Payable                           0.08                    0.09

Alphabet (Google) Profitability Ratios

Ratios 2019 2018 2017 2016 2015
Return on Assets 12.45% 13.20%
Return on Equity 17.05% 17.30%
Net Profit Margin 21.22% 22.46%
Gross Profit Margin 55.58% 56.48%
Operating Profit Margin 21.15% 19.24%
Basic Earning Power 12.41% 11.31%
ROCE 14.84% 13.28%
Capital Employed                     230,688              198,172
ROIC 36.59% 34.19%

Alphabet (Google) Long-term Debt

Ratios 2019 2018 2017 2016 2015
Debt Ratio 1.65% 1.72%
Debt/Equity 2.26% 2.26%
Times Interest Earned                         58.51                    3.86