What Is The Real Value Of Alphabet Inc (GOOGL) Using A Simple DCF

Johnny HopkinsStock Screener3 Comments

As part of a new series, each week we’re going to conduct a DCF on one of the companies in our screens. This week the stock is Alphabet Inc (GOOGL). We currently have the stock on an Acquirers Multiple of 20.90. The stock is currently priced at $131.40.


Alphabet is a holding company. Internet media giant Google is a wholly owned subsidiary. Google generates 99% of Alphabet revenue, of which more than 85% is from online ads. Google’s other revenue is from sales of apps and content on Google Play and YouTube, as well as cloud service fees and other licensing revenue. Sales of hardware such as Chromebooks, the Pixel smartphone, and smart home products, which include Nest and Google Home, also contribute to other revenue. Alphabet’s moonshot investments are in its other bets segment, where it bets on technology to enhance health (Verily), provide faster internet access (Google Fiber), enable self-driving cars (Waymo), and more.


  • Discount Rate: 8%
  • Terminal Growth Rate: 2%

Forecasted Free Cash Flows (FCFs)

Year FCF (billions)
2023 72
2024 87
2025 105
2026 126
2027 152

Terminal Value

Terminal Value = FCF * (1 + g) / (r – g) = 2584.00 billion

Present Value of Terminal Value

PV of Terminal Value = Terminal Value / (1 + WACC)^5 = 1758.63 billion

Present Value of Free Cash Flows

Present Value of FCFs = ∑ (FCF / (1 + r)^n) = 420.67 billion

Enterprise Value

Enterprise Value = Present Value of FCFs + Present Value of Terminal Value = 2179.30 billion

Net Debt

Net Debt = Total Debt – Total Cash = -9.02 billion

Equity Value

Equity Value = Enterprise Value – Net Debt = 2188.32 billion

Per-Share DCF Value

Per-Share DCF Value = Enterprise Value / Number of Shares Outstanding = $171.23


DCF Value Current Price Margin of Safety
$171.23 $131.40 23.26%

Based on the DCF valuation, Alphabet is currently undervalued. The DCF value of $171.23 per share is higher than the current market price of $131.40. The Margin of Safety is 23.26%.

It is important to note that the valuation is based on a number of assumptions, and these assumptions could change in the future. As a result, it is important to do your own research before making an investment decision.

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3 Comments on “What Is The Real Value Of Alphabet Inc (GOOGL) Using A Simple DCF”

    1. Thanks Gary. You might be right. I’m a little more optimistic about the company’s projected free cash flow. Last 5 years FCF has been 22,832, 30,972, 42,843, 67,012, 60,010 (amounts in billions).

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