Comparing The Fundamentals Of Big Tech Stocks Following Q3 Earnings


Now that most companies have reported Q3 earnings, Benzinga took a look at some of the largest, most popular tech companies in the world to determine how much value investors are getting from a share of stock at the current market price.

Here’s a breakdown of how, Inc. AMZN, Alphabet Inc GOOGL GOOG, Facebook Inc FB, Apple Inc. AAPL and Netflix, Inc. NFLX look from a fundamental standpoint now that their latest quarterly financials are factored in.

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A price-to-earnings ratio (PE) is one of the most basic fundamental metrics for gauging a stock’s value. The lower the PE, the higher the value. Here’s how the current PEs for these five big names compare.

Apple is the only stock of the group with a PE lower than the S&P 500’s overall PE of 22.0. Facebook, Netflix and Amazon’s PEs of over 90 are nowhere near the typical range. Apple and Amazon were the only two companies to improve their PE in Q3 compared to Q2.


However, when it comes to evaluating a stock, price is not everything.

Growth rate is also critical for companies that are rapidly building their bottom lines. The price-to-earnings-to-growth ratio (PEG) is a good way to incorporate growth rates into the evaluation process. Here’s a comparison of the PEGs of these five names.

Again, Apple is the only stock with a PEG lower than the overall S&P 500. Alphabet’s 2.2 PEG is relatively high; Facebook and Netflix’s PEGs are more than double the S&P 500 average. Amazon’s negative earnings growth over the past four quarters does not allow for a PEG calculation.

Cash Flow

Finally, when a company reinvests a large portion of earnings back into the company for the purpose of expanding operations and growing the business, earnings numbers aren’t the best measure of a company’s performance or a stock’s value.

Instead, investors may choose to focus on cash flow from operations, which indicates how much cash a company generates from regular business activities. Take a look at the price-to-cash-flow-from-operations ratio for each of these five companies.

Once again, from a value perspective, Apple comes out on top as the only stock that beats the S&P 500 average. Alphabet’s ratio is above average, but Amazon and Facebook’s P/OCF are substantially more than twice the S&P 500 average. Netflix has generated negative operating cash flow during the past four quarters. Apple was the only company to lower its P/OCF in Q3, while Alphabet and Amazon’s experienced the largest jumps.


While Apple shareholders may be concerned about the stock’s stagnant share price, the company continues to add to its appeal from a value perspective. Shareholders of Amazon and Netflix, on the other hand, must hope that the market continues to reward the companies' growth despite extremely high valuations compared to peers.

Disclosure: The author holds no position in the stocks mentioned.

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