google! a very strong player in the tech environment and they just recently announced
a 20 for one stock split coming on july 15th which means for every one share you own it'll now become
20 shares that you own of google but is this stock worth considering or avoiding altogether well
that's what we're talking about in today's video a detail behind the stock split we're actually going
to look under the hood and see if this company is still strong financially and could potentially
still grow from the standpoint of their stock price and see if they're really a strong company
or a weak company now google does a lot they have of course google fi their own phone service
but also they have google the search engine and the thing that we're talking on right now oh yes
youtube is part of google they are the number one and number two top search engines in the world but
why do a stock split well right here as of yahoo finance you can see it's currently going for
2 855 as of the recording of this video it ranges anywhere from about 2800 to 2700 on the low end
so that's a lot of money and there's a couple of reasons that a company wants
to do a stock split the very first one is to get more people interested in their company in
fact if i scroll out here to one month you can see that they announced the stock split coming
and look what's been happening ever since there's more momentum in the stock more people are turning
their heads and looking at google so that's actually a little bit of a publicity stunt
that can happen when you announce a stock split but it's also to help get more people
into the market now of course in today's world you can get fractional shares of companies that
cost a lot of money but in the old days you actually had to buy a full share you couldn't
buy fractional shares so in the past this was very very important for a company to do because
in order to buy one share of google you would have to put up at least 2 855 right now
in order to buy google at all so that was a big deal but number two more importantly than that
is options trading it still does impact options trading to have a stock this high in price when
you're trying to do options trading and you got to have the minimum in order to do a call or report
that can be quite expensive to do another great reason to do a stock split and number
three especially in google's case it allows them to be part of the dow jones industrial average
and being part of the dow jones also gives them more exposure exactly what they're looking for
in this particular case let me give you an example of how that works and why you don't actually lose
money or gain money in a stock split i'm going to draw a pizza don't laugh at my pizza drawing
i'm okay with it so here's what let's say you get this pizza right this pizza costs roughly around
20 okay so that would be technically we'll pretend the pizza is your share of google and it's 20 okay
just to make it easy for the purpose of what we're explaining here now you have one pizza it's 20
and all of a sudden you decide i don't want to eat that whole pizza i'm going to split it up into
into different slices right so all of a sudden you come through and you decide to take the knife to
it and you're going to split it up and that's exactly what google's about to do with their
stock split now right now you can see we have all these lines in our pizza and they're now
all cut and these beautiful little triangles but you still have your one pizza so that one pizza
your your share of google that is worth twenty dollars still exist it's just now you have one two
three four five six seven eight you now have eight slices of pizza but because you haven't eaten it
yet in this case it's still worth twenty dollars and that's the whole key so you're gonna have
your one share and it's gonna be split up into many different not just eight but twenty times
and it's still gonna be worth the amount that you put in which just means you're going to have more
so if you bought one share at 2 800 let's say it was 28.80 okay in the case of google after july
15th if all remains the same on the current price of 28.80 you'll then have 20 shares and those 20
shares will be worth 28.80 see what i'm saying so that's how a stock split works same amount of
value but now it's in microchunks which means the price of the asset will be lower but your value
does not drop now the key point of this though is because let's say it's going now for 150 a share
you have this guy and his name is joe all right so joe is like you know he turns his nose up at the
2800 price it's 28.80 whatever he's like no i'm not buying google for 28.80 that's too much money
but all of a sudden after the stock split on july 15th it's now going for let's say 150
he might be like hmm i'm interested now in google i like what google has to offer i'm
now going to go ahead and buy a few shares now what that does is that gives more retail
investors the opportunity to get in on google which could potentially drive the price up
for google now i'm not saying back up to 28.80 i'm just saying it could go up maybe to like
190 or 200 but because you got in before the stock split you get to kind of ride this up
as it performs but that brings us to the next point in order for this to happen we do need to
ensure that the company's fundamentals are on point so it's time to show me the money let's
go behind the scenes on google now the first thing i want to bring up is right here on yahoo finance
i will say and this isn't really a spoiler alert it's just something to keep in mind
they have this rated as undervalued that's pretty darn interesting isn't it it's very hard to find a
big tech company that doesn't show overvalued on the fair value within finance.yahoo.com
that's kind of interesting just passing that along but let's go under the hood first thing
we need to look at is our smart steps we're going to start with the p e ratio and then we're going
to look at the revenue growth the profit margin the debt and the earnings per share those are
going to be the smart steps that we look at today for google let's see if it's worth looking into or
not this is not financial advice what i'm doing is i'm taking you through what i do to research
a fundamental of the company these values can go up and down you could lose money or make money
do your own research and be the judge of your own financial future now for p e ratio we can see that
right here on yahoo now that's a pretty good p e ratio of only 25 40. i like to look anywhere from
the 15 to the 18 range but the fact that we have a good big conglomerate like google otherwise known
as alphabet incorporated going for 25.4 on a pe ratio i'm gonna say that is pretty darn good now
i don't want to just sit here and bless it with a green light just because it just looks cool
because it's a big company but what i'm gonna do is i'm gonna give that a yellow light because it's
close enough to that 15 to 18 and that's why it's probably showing undervalue on finance.yahoo.com
but that's pretty darn good not enough for a green light and certainly not anywhere near a red light
but we're going to say hey that's a cautionary thing just to keep an eye on we want to see that
continue to perform well and potentially as the company continues to grow to maintain its fair
value now for this next piece of research i'm actually going to use weeble because it's been
very easy to use and i'm going to show you exactly how to do that if you don't have the
weeble brokerage app you can join today use the link in the description below and when you do
this is what you're going to see you get five free stocks for a limited time when you open and
fund a new account check it out you first open an account and you'll get two free stocks each
valued up to three hundred dollars then when you deposit any amount to trade in the stock market
you'll receive an additional three stocks valued up to three thousand dollars link down below and
then what you can do is follow along with me on how i do some of this research now under
the watch list i'm going to type in g-o-o-g-l in the weeble app and i'm going to click on it
i'm going to hop over to this tab that says company click on that and then down here at
the bottom you see it says financial details this is where we're going to see the revenue
growth specific to if we're going to assign this a green yellow or red light of course i don't think
i need to explain this but red means a void green means it's good and yellow means keep an eye on it
just like a stoplight so let's click on financial details now what i want to do first is look at
revenue growth you come down here and you can see the net income but you want to click on the
income statement to where it says total revenue now what we're looking for is increase over time
which obviously i can see that pretty clear as daylight check this out for 2017 110 billion
dollars made wouldn't that be nice to make 110 billion dollars oh my gosh but look
then it keeps going up 136 161 182 last year 257 billion dollars in revenue that is remarkable
and you can see it continues to go up you got a 22 improvement 23 18 12 and 41
improvement it's obvious this is getting a green light for google wow that's freaking awesome
let's look at their profit margin now in order to calculate what your profit margin is it's a very
simple calculation you take the net income of the company so net income and you divide that by the
total revenue and what that'll do is that gives you a percentage and that percentage is the profit
margin what we want to see is obviously positivity in what we're looking at so we're going to hop
back over here to weeble we're going to pull up their net income so i can just click on the income
statement right there it is net income we'll take the last year as an example so net income is 76
now we're we're dealing with billions of dollars but to make it easy i'm just going to do 76.03
and i'm going to divide that by the total revenue which is 257 point so that is what
we're going to do to find the profit margin so 76.03 divided by 257.64 equals a wow 29.5
profit margin not bad at all i'm going to give that one a green light debt is also something
you want to look at in any company that you investigate and especially in something like
google should you buy before the split after the split what's the fundamentals look like that's
exactly what we're doing here so let's look at their debt we want them to have a fairly low debt
load now newer companies will tend to have a lot of debt because they're trying to innovate they're
trying to grow so they've got to take on a lot of debt in order to grow their business operation but
the goal would be in the very very soon future we want to see some profitability and we want to see
assets be more than liability so right here on our weevil financials we're going to scroll down here
to where it says balance sheet and that is what we need to look at so total assets as of 2021 at
the end of the year was 359 billion pair that up to 107.63 billion of liabilities which means if
you take 359 minus 107 that's 252 billion dollars which means if they sell everything they'll still
have money they'll still have cash on hand of 252 billion dollars that means their debt to
asset ratio is only 29.96 that is phenomenal and also why they deserve a green light now let me
give you a quick example of something that doesn't look as good if we look over at let's say best buy
now i haven't looked at this yet i'm actually swinging from the hip here but i have an idea
of what this is going to look like if i go to best buy we go to company and then we go
to their financials in their financial details if you scroll down to their balance sheet and
right there it is i knew it so and the reason for that is they are a retailer so they're going to
have to hold a lot of liabilities and hope that they can sell those liabilities aka the products
that they push to the consumers but look at that 17.5 billion in assets but 14.48 billion
in liabilities that's a very high debt load of 82 percent debt to asset that is quite high so
for that i would give that a yellow to probably a red light for best buy as a result of carrying so
much debt and especially if you look back on it look 72 74 77 75 and 82 in the last year for 2022
what their fiscal year was in 2022 is much higher than it has been over the last couple of years
they're taking on more debt versus like versus assets and that is a little bit of a concern so
just to give you an example of what kind of a bad one looks like as opposed to google
where they're earning that green light next up is earnings per share that's actually at the top
of the financials right here on weeble eps what you want is you want that blue line to be above
the gray line and that just basically means the analysts are estimating what the earnings per
share will be of a particular company and they do it based on quarter you have quarter one quarter
two quarter three of 2021 but look what's happening it's continuing to beat that out
now they did downgrade their thoughts for quarter one of 2022 as you can see the gray line is going
down a little bit however they're continuing to beat even quarter four 2021 the estimates which
means that that also gives that a green light so look at this out of our smart steps for a company
as powerful and big as google which tends to see a lot of yellow and red this is looking pretty good
green green green green and one yellow light just to keep an eye on to make sure we don't tip into
over value category this is looking pretty good so what i would continue to do especially if i'm
investing in any particular company is i'm gonna keep an eye on the news and i'm going to keep an
eye on innovation so we want to continue to see some news and innovation that is positive for
any company remember when you become an investor of any type of company you're becoming an owner
of that company and when you are you want that company to do well as any owner of any company
you got to keep your eye on the business so that's pulling up your weibo account taking a look every
quarter when they announce their earnings and their details and start getting used to that type
of material if things start going away that you don't like that's where you can make a decision
for yourself as an investor do i continue to invest or do i start pulling back a little bit
on that particular investment that's where you have to be the judge in any financial decision
that you make and if you're not aware or not familiar with how to do it make sure you consult
a financial advisor so in full transparency i do have some shares of google i have quite a few
not only in my normal brokerage but also in my retirement accounts and i am definitely looking
forward to july to see those shares split and give me a 20 to 1 ratio it's gonna be super
super awesome what are your thoughts on google what analysis do you want me to do next drop me a
comment down below now be sure you check out this video next and we'll see you on the next video