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 (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
|R & D||26,018||21,419||16,625||13,948||12,282|
Alphabet Balance Sheet Summary
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
|Short Term Investment||101,177||92,439||91,156||73,415||56,517|
|LT Debt - Current||-||-||-||-||-|
|Total Current Liabilities||45,221||34,620||24,183||16,756||19,310|
|Total Equity & Liability||275,909||232,792||197,295||167,497||147,461|
Alphabet Financial Ratio Summary and Analysis
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
|Net Working Capital||7,426||8,057|
Alphabet (Google) Asset Utilization
|Total Asset Turnover||0.59||0.59|
|Fixed Asset Turnover||2.20||2.29|
|Days Sales Outstanding||57.11||55.59|
|Accounts Receivable Turnover||6.39||6.57|
|Working Capital Turnover||21.80||16.98|
|Average Days Inventory||0.44||0.34|
|Average Days Payable||0.08||0.09|
Alphabet (Google) Profitability Ratios
|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%|
Alphabet (Google) Long-term Debt
|Times Interest Earned||58.51||3.86|