$GOOGL · Everything Money · 2026-10-31

Then we will put the “buy the dip” strategy to a real test with three big names whose shares have declined. Google, Meta, and Dell.

So, let's put that into practice now. Let's take these three companies that have declined as spending on artificial intelligence has piled up – Google, Meta, and Dell – and discover their true value.

Right now, guys, Google is down 12 % right now because they just announced their earnings and they did well, but the stock is still under pressure. Market capitalization is the number of outstanding shares multiplied by the share price.

This is why a company's stock price could be $300 compared to another company's $500,000, such as Berkshire Hathaway, but the company with a $300 stock price might be worth more. 3.5 trillion.

The next thing I do is move on to the value proposition of the organization. The difference between the value of the firm and its market value is essentially their debt. So, 3.54 trillion versus 3.5 trillion equals 40 billion dollars.

This basically means that Google's net debt, if you take all their debt and subtract the cash, is $40 billion.

This seems like a large sum. Not when it generates $53 billion in free cash flow last year and $63 billion annually over the past five years. Therefore, this is a very low debt level for a company of this size.

Next, look at the return on capital. Guys, I want to know if this is high-quality work. This scale tells me that. It is higher than the market average of 9 or 10%, and is actually at 19 and close to 20% over the past five years.

This is high-quality work that deserves a bonus when analyzing the company .

Now, the gross profit margin here is 61%. This means that for every additional dollar they earn, 61% goes to profit. Why is this important? Well, guys, this profit margin has continued to grow over the past 1, 5 and 10 years.

Now , you see a huge jump in the last year. This is due to SpaceX's initial public offering (IPO). When it became a public company, its value increased. They were forced to report it as income, even though it was not actually sold.

So, the bottom line is that Google's profits continue to improve, which is something I like. Now, folks, the ratio of stock price to free cash flow is 65 times free cash flow. But remember, their cash flow is very low because they continue to spend money on data and artificial intelligence expenses. This is huge.

Their price-to-earnings ratio is exaggerated because of their reporting on SpaceX. So, overall, we look at this and we really need to sit down and calculate the operating income.

Let's take a look at this company's operating income. This is the income that comes from actually running the business, and does not include any other investment in SpaceX or anything like that .

Look at this growth in operating income. It is located here on this line. 29, 33, 36, 41, 79, 75, 84, 112, 130, and 107.656 billion dollars. This is amazing. This company is growing like crazy.

Okay, let's check out the eight pillars. So, their cash flow is low, and this is because of their spending on artificial intelligence. Everything else seems positive and complete.

They are buying back shares, and their five-year price-to-earnings ratio and five-year price-to-free cash flow ratio are high.

Now, having said that, the number is 55. Those are really high numbers. But if they can grow their profits and free cash flows, let's say an exaggeration of 100% per annum for 10 years, that's a very low price to pay.

What do analysts think about the company's future? Well, the interesting thing is that they actually do n't have much growth. They have a significant drop in their earnings from 20.57 to 15, then they will return to growth again to reach $25 per share in the next four or five years .

This somewhat surprises me, even with 34 analysts submitting their reports. They all believe there will be a significant drop in their profits next year. As for revenues, ironically, they achieved growth of 24%, then 23%, 19%, 13%, and 13% .

Yes, growth is slowing, but it hasn't stopped, and that's why I'm so confused about earnings per share growth being negative next year.

So, first and foremost, I'm going to do a 10- year analysis of Google. My first question is: What will revenue growth look like for the next ten years? Okay, guys, I'm going to set a minimum of 7%, a maximum of 20%, and an average of 12% revenue growth over the next ten years.

Next, what do I think about profit margin and free cash flow margin over the next ten years? Remember, folks, free cash flow is affected by their capital expenditure, but I'm going to keep it here with the profit margin, and I'm going to ignore those numbers.

I will focus on the profit margin here and I will put the same figures. As we have seen, their profit margin and free cash flow are improving. So, I will actually do this. I'll put 28, 32, and 36.

These numbers might still be low, by the way, guys. If their profit continues to improve more and more, they may achieve an average of 35, 36, or 37 for the next ten years. But I don't mind being a little cautious because with this AI spending, nobody knows what will happen with it .

Next, what is the price-to-earnings ratio or free cash flow rate that this company might have 10 years from now? One way to look at it is that the average S&P index has ranged between 15 and 17 over long periods of time.

Is this company better than average? Does it have a competitive advantage? I would say yes. It owns the world's two largest search engines, Google and YouTube. Does it have a good balance sheet?

Yes, we saw that their debts were very low. Do they have high returns on capital? Right here. It's good and constantly improving. Do they have growing profit margins ? Guys, these are all positive signs for this company.

Therefore, I think I should put a price premium here. I will put 20 , 23, and 26.

Finally, for educational purposes, I always put a market return of 9.5%. Here I determine the value of the company, not the price I am willing to pay, but the price I believe it is worth in the market .

Remember, we need a safety margin. Therefore, for those who use a stock analyst themselves, make sure to set a higher return rate than you can get in the market.

Okay, I'll press the analyze button. I'll scroll down . I have a low price of 240, a high price of 1000, and an average price of 450. This means that if my average assumptions are correct and I buy the stock at today's price, I will get a return of about 15.5% on my money. This is absolutely fantastic, guys.

Remember, there are no recommendations here. Never take this advice and say, "Oh, I should buy the stock." I'm just making assumptions. You need to do your homework by researching all the stocks.