How Google just posted a A$12.4 billion quarterly profit

Should Australian investors look overseas for the best growth shares?

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Australian investors seeking growth shares should wake up to the US's dominant tech leaders including Alphabet Inc. (or Google) after it delivered a US$8.9 billion (A$12.4b) profit on revenue of US$39.3 billion (A$54.4b) for the quarter ending December 31 2018.

Revenue grew 23% on a constant currency basis and the profit result is despite the business booking a US$1.4 billion operating loss due to its 'Other Bets' segment investing in developing the huge winners of tomorrow.

For example 'Other Bets' contains its Waymo self-driving car business, Verily healthcare research businesses, Google Fiber, and Venture Capital investment businesses all working on what could be Alphabet's new growth drivers over the next 5 to 10 years.

Alphabet already has 8 separate products that boast more than 1 billion monthly active users, including Google Maps, Gmail, YouTube, Search, Android, and Chrome in a stat that reflects the company's wide moat in the consumer and enterprise services tech space.

This means the majority of Google's revenue still comes from advertising thanks to its data and reach, with YouTube growing especially quickly and advertising revenue growing 20% on the prior corresponding quarter.

Alphabet posted US$12.77 in earnings per share over the quarter to mean it has earned US$41.82 per share over the past year excluding the impacts of the EU's cash-grab regulatory fines that are being appealed.

So we can see Alphabet trades on 27x trailing earnings per share at US$1,141, although it's growing its top line at rates above 20% despite coming off a huge base.

This kind of valuation compares favourably to hot tech shares in Australia such as WiseTech Global Ltd (ASX: WTC) that trades on over 50x enterprise value to its own forecast EBITDA!

In other words Alphabet looks a bargain compared to some of Australia's WAAAX tech stocks including WiseTech.

Alphabet stock is down 3% to US$1,110 in after hours trade and given it looks a long-term winner, Australian investors would do well to add it to their portfolios.

Tom Richardson owns shares in Google (GOOGL). You can find Tom on Twitter @tommyr345 Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors.The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (A shares). The Motley Fool Australia owns shares of WiseTech Global. The Motley Fool Australia has recommended Alphabet (A shares). We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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