Source: Google Shouldn't Be, But Approaches, A Buffett 10x EBT Stock
The argument in this article is quite simple: Alphabet Inc. (NASDAQ:GOOG) (“Google”) is undervalued based on the Buffett 10x EBT (earnings before taxes) rule. It is selling at a valuation of around 13x FW EBT only after its cash position is adjusted. At such a valuation, the market essentially views Google as a terminally stagnating business. A 13x FW EBT already provides close to 8% of pretax earnings earning yield, making it equivalent to owning an equity bond with a similar yield (bond yields are all quoted on a pretax basis). Any growth will be a bonus at this valuation.
To be more specific, as of this writing, Google's stock price is about $98 per share. And my estimate for its 2023 EPS is about $5.8 per share and its tax rate is about 14%. And finally, do not forget that it has about $9 of net cash position sitting on its balance sheet (more on this later). Putting all these numbers together, its current valuations turn out to be ~13x FW EBT after the cash position is subtracted from its stock price.
At such a valuation, Google is essentially viewed by the market as a terminally stagnating business, according to Buffett's 10x EBT rule.
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