You may want to buy Google stock, but you are concerned if it is halal or not.
Stock – Google
Ticker – GOOGL
Sector – Technology
Compliance Status – Questionable
Why it is a buy – GOOGL stock has jumped 61% in 2021.
Let’s take a look at their financial results. To consider if Google stock is halal, we will use the three financial ratios criteria to evaluate its halalness.
- The business activity
- Interest-bearing debt to its market cap
- Interest-bearing securities to its market cap
Google’s Business:
Google was founded in 1998, and Alphabet became the parent holding company of Google in 2015. Currently, Alphabet, Inc. is a holding company that employs 144,056 full-time employees. The company’s businesses include Google and its internet products such as Calico, GV, Nest, Verily, and X. The firm’s segments include Google and Other Bets. The firm’s Google segment includes Internet products such as Search, Ads, Maps, YouTube, Android, Chrome and Google Play, Google Services, and Google Cloud. In addition, The Google segment deals with advertising, sales of digital content, applications and cloud offerings, and hardware products. While the Other Bets segment is engaged in Internet and television services, licensing, and research and development (R&D) services.
Financial Screening
Firstly, we check business activity. The company’s impermissible business activities account for 0.50% of its overall revenue. However, 80.37% of total revenue comes from questionable activities. Since non-Islamic business segments may exceed 5% of its total revenue, Google does not pass the business activity screening.
Secondly, we analyze its interest-bearing debt ratio. The debt amount should not exceed 30% of its market cap. The percentage of interest-bearing debt is 2.50% of Google’s market cap.
| Total Debt | $14.81B |
| 36 Months Average Market Cap | $592.41B |
Finally, we screen the interest-bearing securities ratio. Google’s interest-bearing securities account for 22.61% of its market cap. The number of securities that aim to receive interest should not exceed 30% of its market cap.
| Cash & Equivalents | $133.94B |
| 36 Months Average Market Cap | $592.41B |
Although Alphabet Inc passes two financial screenings, more than 5% of its total revenue may come from unknown business activities. Therefore, Google stock is one of the doubtful stocks from a Sharia Perspective, and Muslim investors may want to avoid investing in such questionable investments.
Musaffa also has a halal stock screener where you can access the materials anytime and get the full report about the Compliance status of stocks. Visit our platform: musaffa.com.
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As a financial expert with a deep understanding of Islamic finance and investment, I've extensively studied and analyzed various aspects of halal investment criteria, including the evaluation of stocks like Google (GOOGL).
To establish my expertise, I've assessed Google's compliance with Islamic finance principles based on the provided information. Let's break down the concepts and criteria used in the article:
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Interest-bearing Debt to Market Cap Ratio:
- This ratio assesses the proportion of interest-bearing debt concerning the company's market capitalization. In Google's case, the interest-bearing debt stands at 2.50% of its market cap, which is well below the permissible threshold of 30%. This indicates a favorable aspect from a Shariah-compliant perspective.
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Interest-bearing Securities to Market Cap Ratio:
- This ratio measures the proportion of interest-bearing securities relative to the market cap. Google's interest-bearing securities account for 22.61% of its market cap, also below the allowable limit of 30%. Hence, it meets the criteria from this angle as well.
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Business Activity Screening:
- In Islamic finance, businesses involved in impermissible activities should not contribute significantly to a company's revenue. While only 0.50% of Google's revenue is derived from non-Islamic activities, a considerable 80.37% of its total revenue is generated from questionable activities. As per Islamic finance principles, non-Islamic business segments exceeding 5% of the total revenue could render the stock non-compliant. Hence, Google does not pass the business activity screening.
Considering these evaluations, it's evident that while Google meets the criteria for interest-bearing debt and securities, it fails the business activity screening, which is a crucial determinant for Shariah compliance.
Furthermore, the article suggests using platforms like Musaffa for accessing comprehensive reports on the compliance status of stocks and their adherence to Islamic finance principles. It also encourages readers to explore more Islamic finance-related topics and offers free stock screening services through Musaffa's platform.
In summary, despite Google showing promising financial ratios concerning debt and securities, its revenue from questionable activities surpasses the acceptable threshold, making it a doubtful investment option for Muslim investors seeking Shariah-compliant stocks.
If you want to explore more about Islamic finance and related topics, the provided links in the article and the services offered by Musaffa can be valuable resources to deepen your understanding and make informed investment decisions in accordance with Islamic principles.
