If you have ever wondered what to do with your Alphabet shares, or found yourself hovering over the Buy or Sell button, you are not alone. The company behind Google continues to turn heads and make headlines, most recently with an impressive 7.1% uptick in the past week alone. The one-year return is up a whopping 55.7%, and if you zoom out even further, the stock has rocketed more than 212% in five years. Clearly, Alphabet is no stranger to long-term growth. Every rally raises a familiar question: is there still room to run, or are we bumping up against fair value?
Some of these moves can be traced back to headlines that keep Alphabet’s story dynamic. Waymo’s plans to launch a driverless ride-hailing service in London have stirred excitement about future growth streams, while attempts to resolve EU antitrust concerns and major data center investments reinforce Alphabet’s global ambition and resiliency, rather than any signs of retreat. Each news cycle seems to add a new wrinkle, prompting investors to reconsider what the company could be worth relative to today’s price.
That is where valuation checks come in, offering a framework for separating hype from real opportunity. Based on our toolkit of six methods, Alphabet comes in with a value score of 2, showing it is undervalued in two out of six key checks. But there is a lot more nuance hiding beneath that simple score. Next, we will unpack the different ways analysts arrive at a valuation, and if you stick around, reveal an even better way to cut through the noise and make sense of what this score really means.
Alphabet scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.
The Discounted Cash Flow (DCF) model estimates a company’s underlying value by projecting how much cash the business will generate in the future and then discounting those cash flows back to today. For Alphabet, this method starts with its impressive trailing twelve-month Free Cash Flow of approximately $81.4 billion. Analysts provide detailed projections for the next five years, estimating continued growth in these cash flows year over year. By 2029, projected Free Cash Flow climbs to about $140.7 billion. Using Simply Wall St’s methodology, further steady increases are forecast through 2035.
All cash flow projections are denominated in dollars, in line with Alphabet’s reporting. The 2 Stage Free Cash Flow to Equity model applied here results in an estimated intrinsic value of $246.31 per share. When compared with the current share price, this model suggests Alphabet is trading at a 2.8% premium to its calculated fair value, making it ever so slightly overvalued by this standard.
Simply Wall St performs a valuation analysis on every stock in the world every day (check out Alphabet’s valuation analysis). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes.
The price-to-earnings (PE) ratio is widely regarded as the go-to metric for valuing profitable companies like Alphabet because it directly ties the share price to how much profit each share generates. This ratio tells investors how much they are paying per dollar of earnings, offering a quick gauge of market sentiment.
However, not all companies deserve the same PE. A higher ratio can be justified for businesses with faster expected growth, stronger profit margins, or lower risk profiles. A lower ratio is typical for riskier or slower-growing firms. Context is key, and that is where benchmarks come into play.
Alphabet currently trades at a PE of 26.5x. For comparison, the average PE for industry peers in Interactive Media and Services is much lower at 15.4x, and Alphabet’s peer group averages 54x. This wide range emphasizes how simplistic peer comparisons can be for a global tech leader.
Simply Wall St’s Fair Ratio offers a smarter benchmark by blending Alphabet’s unique growth outlook, risk factors, profit margins, industry standing, and market cap into the equation. This yields a Fair Ratio of 41.7x for Alphabet, setting an expectation that is higher than the broad industry but below the peer group.
With a Fair Ratio of 41.7x and an actual PE of 26.5x, Alphabet’s shares look comfortably valued relative to its own fundamentals. While not at a bargain, the stock does not appear to be overstretched for its quality.
Earlier, we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a more powerful and dynamic approach for making investment decisions. A Narrative is your personal story or perspective on a company, connecting the business’s real-world journey to your financial assumptions like fair value, future revenue, earnings, and margins. Instead of looking only at static numbers, Narratives link your outlook on Alphabet’s unique position, opportunities, and risks to a forward-looking financial model and resulting fair value.
Narratives are designed to be accessible and easy to use, available within Simply Wall St’s Community page, where millions of investors share and refine their views. They help you decide when to buy or sell by letting you directly compare your computed Fair Value to the current market price, and because they update as soon as new news or earnings emerge, your perspective stays relevant. For example, among Alphabet Narratives, some investors see long-term cloud and AI growth propelling a fair value above $268, while others focus on competitive and regulatory pressures for estimates as low as $166, demonstrating how different stories result in different investment conclusions.
NasdaqGS:GOOGL Community Fair Values as at Oct 2025
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Companies discussed in this article include GOOGL.
