Critical Analysis: Alphabet (GOOG) and GDS (GDS)

Alphabet (NASDAQ: GOOG) and GDS (NASDAQ:GDS) are both computer and technology companies, but which is the better investment? We will compare the two companies based on the strength of their valuation, profitability, institutional ownership, risk, earnings, dividends and analyst recommendations.

Risk & Volatility

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Alphabet has a beta of 1.08, indicating that its stock price is 8% more volatile than the S&P 500. Comparatively, GDS has a beta of 2.56, indicating that its stock price is 156% more volatile than the S&P 500.

Insider & Institutional Ownership

34.8% of Alphabet shares are owned by institutional investors. Comparatively, 20.9% of GDS shares are owned by institutional investors. 13.9% of Alphabet shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Profitability

This table compares Alphabet and GDS’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Alphabet 11.42% 14.94% 12.20%
GDS -20.29% -10.11% -3.20%

Valuation & Earnings

This table compares Alphabet and GDS’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Alphabet $110.86 billion 6.69 $12.66 billion $32.05 33.31
GDS $248.40 million 10.46 -$48.38 million ($0.51) -52.31

Alphabet has higher revenue and earnings than GDS. GDS is trading at a lower price-to-earnings ratio than Alphabet, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a breakdown of recent recommendations and price targets for Alphabet and GDS, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Alphabet 1 6 32 0 2.79
GDS 1 0 2 0 2.33

Alphabet currently has a consensus price target of $1,094.07, suggesting a potential upside of 2.49%. GDS has a consensus price target of $29.03, suggesting a potential upside of 8.82%. Given GDS’s higher probable upside, analysts clearly believe GDS is more favorable than Alphabet.

Summary

Alphabet beats GDS on 11 of the 14 factors compared between the two stocks.

Alphabet Company Profile

Alphabet Inc., through its subsidiaries, provides online advertising services in the United States and internationally. The company offers performance and brand advertising services. It operates through Google and Other Bets segments. The Google segment includes principal Internet products, such as Ads, Android, Chrome, Commerce, Google Cloud, Google Maps, Google Play, Hardware, Search, and YouTube, as well as technical infrastructure and newer efforts, including Virtual Reality. This segment also offers digital content, enterprise cloud services, and hardware products, as well as other miscellaneous products and services. The Other Bets segment includes businesses, such as Access, Calico, CapitalG, GV, Nest, Verily, Waymo, and X, as well as fiber Internet and Television services. Alphabet Inc. was founded in 1998 and is headquartered in Mountain View, California.

GDS Company Profile

GDS Holdings Ltd is a developer and operator of data centers in China. The Company is engaged in design, build-out and operation of data centers. It operates as a carrier and cloud neutral, which enables its customers to connect to all the People’s Republic of China telecommunications carriers, and to access a number of the People’s Republic of China cloud service providers, whom it hosts in its facilities. The Company’s base of approximately 370 customers consists of Internet companies, financial institutions, telecommunications and information technology (IT) service providers, and domestic private sector and multinational corporations. It serves a community of approximately 160 People’s Republic of China and foreign financial institutions across the banking, insurance, asset management, brokerage, digital payment and financial information verticals. The Company operates its data centers in Shanghai, Beijing, Shenzhen, Guangzhou and Chengdu.

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