This week the Valens Research team highlights our most interesting equity insight from across our tools and our analysis.
Management focus on maintaining ROA’ and confidence about driving growth mean market expectations for ROA’ declines are too pessimistic and the company is undervalued
GOOGL has seen steady UAFRS-based (Uniform) ROA decline from 100%+ to 30% over the past 15 years as the company has aggressively invested to grow the business and their cash flow streams. Markets expect Uniform ROA (ROA’) to continue declining over the next five years, approaching 15% by 2022. Moreover, Uniform Asset growth is expected to be at the lower end of historical levels, at 15% a year. However, considering fundamental signals about the business, the market’s expectations appear far too pessimistic.