As earnings season kicks into high gear, we at InvestingPro are on the lookout for particularly strong companies set to report quarterly numbers this week – those that look poised for growth whether or not they beat Wall Street expectations in that particular quarter. And for that, we’ll check the InvestingPro Financial Health Score, which helps us find the strongest companies in a given industry.
We found 4 successful VIP Pro Picks, including the ubiquitous Alphabet (NASDAQ:GOOGL) (NASDAQ:GOOG).
The InvestingPro Financial Health Score combines detailed assessments of a company’s cash flow health, growth, earnings strength, and more to provide a rich picture of its prospects as an investment. And the result can be quite revealing – because for 7 years, stocks with a rating of at least 2.75 (out of 5.0) outperformed the S&P 500.
Well, operator Google Alphabet landed a stunning InvestingPro “Great Performance” Health Score of 3.33 out of 5.0 – and a closer look at his numbers reveals why.
Above all, the search giant generates a high return on invested capital: its two-year average is 23.8%, in the 95th percentile of its sector. Its profit margins are extremely healthy, outperforming the vast majority of its peers, and it holds more cash than debt on its balance sheet. On the subject of cash flow health, the company is in the cream of the crop for its industry for cash flow to liabilities and cash flow to total debt, as well as its interest coverage ratio.
And when it comes to stock performance, Alphabet’s five-year total return is 106.5% — in the 96th percentile for technology, as data from InvestingPro shows.
And analysts are overwhelmingly calling the stock a buy. Case in point: Stifel just gave the stock a buy rating in March, saying they expect consumer behavior to continue to favor Alphabet despite Microsoft’s recent foray into AI. In May, Morgan Stanley said Google was leading the race for AI assistants.
Looking ahead to this week’s earnings, BofA – which also has a buy rating on GOOGL – just predicted the company will beat Street estimates on the upper and lower lines, raising the company’s price target on the stock to $142 from $128.
Overall for the second quarter, the company’s earnings per share are expected to jump 17.4% from a year earlier – and analysts have revised EPS estimates upwards at a rate of 80% over the past 90 days.
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With all of these EPS revisions — as well as a 35% rise in the stock so far this year — InvestingPro’s fair value still estimates Alphabet’s rise to be around 19% above its current price.
Want to see the full list of this week’s Pro Picks of companies expected to report earnings this week? Start here to unlock much-needed insights and data. And while you’re here, explore InvestingPro’s multitude of tools and filters to start building a lucrative portfolio.
If you’re already an InvestingPro subscriber, the full list of this week’s Pro Picks can be found here.
Data as of July 20, 2023.
Written by:
invest.com
