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Comparing Big Tech Stocks On Fundamentals

May 20, 2017 9:19 am
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Comparing Big Tech Stocks On Fundamentals

Now that most companies have reported first-quarter 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 Amazon.com, Inc. (NASDAQ:AMZN), Alphabet Inc (NASDAQ:GOOG) (NASDAQ:GOOGL), Facebook Inc (NASDAQ:FB), Apple Inc. (NASDAQ:AAPL) and Netflix, Inc. (NASDAQ:NFLX) look from a fundamental standpoint now that their latest quarterly financials are factored in.

Related Link: Short Sellers Digging In On FANG Despite $3.3 Billion In Losses This Year


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 25.4, which is itself historically high at the moment. Netflix and Amazon’s PEs of over 170 are nowhere near the typical range. Looking to the year ahead, Apple’s 14.9 forward PE is the only one that looks appealing from a valuation perspective.


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.

This time, not a single member of the group has a PEG lower than the overall S&P 500. Amazon and Netflix’s PEGs are more than double the S&P 500 average.


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 sales, which indicate how much business a company generates. Total sales can be the best indicator of a company’s growth and potential. Take a look at the price-to-sales ratios for each of these five companies.

Despite the fact that most of these companies are known for their sales growth, not a single one is priced below the average P/S of the overall S&P 500. Amazon’s P/S is closest at 3.17. Google and Netflix’s P/S are substantially more than twice the S&P 500 average. Facebook’s P/S is an absurd 14.34. Investors are clearly paying quite a premium for these companies' huge sales numbers.


When looking at the different measures of value for these big tech companies, there is no clear winner among the group. Apple and Google are at least in the top three of each of the four categories. Netflix, on the other hand, is last or second to last in every single valuation category.

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