Despite a 12% stock decline this year, driven by investor apprehension over potential trade tensions – including President Trump’s recently proposed automobile tariffs and potential increases on European and Canadian goods – we find Alphabet (NASDAQ:GOOG) stock to be an attractive pick at its current price of $165.
This conclusion is supported by our analysis comparing Google’s present valuation with its operating performance in recent years, alongside its current and historical financial standing. While the current administration’s tariff and immigration policies have rekindled inflation anxieties, hinting at potential economic turbulence that could impact tech stocks, it’s crucial to recognize that these near-term macroeconomic headwinds do not alter Google’s long-term prospects.
Furthermore, Google has demonstrated greater resilience than the broader market during one of the two recent economic downturns. Our detailed assessment of Alphabet across key metrics such as Growth, Profitability, Financial Stability, and Downturn Resilience confirms the company’s very strong operating performance and financial condition, as detailed in the following sections. That said, if you seek upside with lower volatility than individual stocks, the Trefis High-Quality portfolio presents an alternative – having outperformed the S&P 500 and generated returns exceeding 91% since its inception.
How Does Google’s Valuation Look vs. The S&P 500?
Going by what you pay per dollar of sales or profit, GOOG stock looks slightly expensive compared to the broader market.
- Alphabet has a price-to-sales (P/S) ratio of 6.0 vs. a figure of 3.2 for the S&P 500
- Additionally, the company’s price-to-operating income (P/EBIT) ratio is 18.7 compared to 24.3 for S&P 500
- And, it has a price-to-earnings (P/E) ratio of 16.8 vs. the benchmark’s 24.3
How Have Google’s Revenues Grown Over Recent Years?
Alphabet’s Revenues have seen notable growth over recent years.
- Alphabet has seen its top line grow at an average rate of 10.8% over the last 3 years (vs. increase of 6.3% for S&P 500)
- Its revenues have grown 13.9% from $307 Bil to $350 Bil in the last 12 months (vs. growth of 5.2% for S&P 500)
- Also, its quarterly revenues grew 11.8% to $96 Bil in the most recent quarter from $86 Bil a year ago (vs. 5.0% improvement for S&P 500)
How Profitable Is Google?
Alphabet’s profit margins are much higher than most companies in the Trefis coverage universe.
Does Google Look Financially Stable?
Alphabet’s balance sheet looks very strong.
- Alphabet’s Debt figure was $25 Bil at the end of the most recent quarter, while its market capitalization is $2.0 Trillion (as of 3/26/2025). This implies a very strong Debt-to-Equity Ratio of 1.2% (vs. 19.0% for S&P 500). [Note: A lower Debt-to-Equity Ratio is desirable]
- Cash (including cash equivalents) makes up $96 Bil of the $450 Bil in Total Assets for Alphabet. This yields a strong Cash-to-Assets Ratio of 21.2% (vs. 14.8% for S&P 500)
How Resilient Is GOOG Stock During A Downturn?
GOOG stock has seen an impact that was slightly better than the benchmark S&P 500 index in one of the two recent downturns. While investors have their fingers crossed for a soft landing by the U.S. economy, how bad can things get if there is another recession? Our dashboard How Low Can Stocks Go During A Market Crash captures how key stocks fared during and after the last six market crashes.
Inflation Shock (2022)
- GOOG stock fell 43.6% from a high of $148.04 on 2 February 2022 to $83.49 on 3 November 2022, vs. a peak-to-trough decline of 25.4% for the S&P 500
- The stock fully recovered to its pre-Crisis peak by 23 January 2024
- Since then, the stock has increased to a high of $207.71 on 4 February 2025 and currently trades at around $165
Covid Pandemic (2020)
- GOOG stock fell 30.8% from a high of $76.33 on 19 February 2020 to $52.83 on 23 March 2020, vs. a peak-to-trough decline of 33.9% for the S&P 500
- The stock fully recovered to its pre-Crisis peak by 10 July 2020
Putting All The Pieces Together: What It Means For GOOG Stock
In summary, Alphabet’s performance across the parameters detailed above are as follows:
• Growth: Very Strong
• Profitability: Very Strong
• Financial Stability: Extremely Strong
• Downturn Resilience: Neutral
• Overall: Very Strong
Alphabet’s current valuation of approximately 6x trailing revenues, while slightly higher than the S&P 500 average, remains marginally below its own five-year price-to-sales (P/S) ratio of 6.2x. We believe that this positioning creates an attractive entry point. The company’s promising earnings growth potential, driven by strategic AI initiatives and the continued momentum in its cloud division, suggests that a premium valuation is not only justified but potentially undervalued.
The strength of Alphabet’s performance across key business segments supports our view that Google stock represents a compelling investment opportunity at $165. The company’s ability to innovate, particularly in AI and cloud technologies, positions it to potentially expand its valuation multiple beyond historical averages, making it an attractive pick for investors seeking growth and technological leadership.
While it looks like there is upside to GOOG stock, the Trefis Reinforced Value (RV) Portfolio, has outperformed its all-cap stocks benchmark (combination of the S&P 500, S&P mid-cap, and Russell 2000 benchmark indices) to produce strong returns for investors. Why is that? The quarterly rebalanced mix of large-, mid- and small-cap RV Portfolio stocks provided a responsive way to make the most of upbeat market conditions while limiting losses when markets head south, as detailed in RV Portfolio performance metrics.
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