eBay Inc Valuation – February 2019 $EBAY

Company Profile (excerpt from Reuters): eBay Inc. (eBay), incorporated on March 13, 1998, is a commerce company, which operates through its Marketplace, StubHub and Classifieds platforms. The Company connects buyers and sellers around the world. Its platforms enable sellers around the world to organize and offer their inventory for sale, and buyers to find and purchase it. The Company’s platforms are accessible through an online experience (desktop and laptop computers), from mobile devices (smartphones and tablets) and by application programming interface (API) (platform access for third-party software developers). The Company’s platform is based on open source technologies that enable software developers and merchants to access its APIs for developing software and solutions for commerce.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of EBAY – February 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $34,298,867,731 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.60 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -29.26% Fail
6. Moderate PEmg Ratio PEmg < 20 16.53 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.66 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.60 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.88 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.27
MG Growth Estimate 10.21%
MG Value $65.60
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $32.89
MG Value based on 0% Growth $19.28
Market Implied Growth Rate 4.01%
Current Price $37.49
% of Intrinsic Value 57.15%

eBay Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the poor dividend history, and the high PB ratio. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of earnings stability over the last five years, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.35 in 2015 to an estimated $2.27 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.01% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into eBay Inc revealed the company was trading above its Graham Number of $19.19. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 16.53, which was below the industry average of 108.89, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-9.92.

eBay Inc receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$9.92
Graham Number $19.19
PEmg 16.53
Current Ratio 1.60
PB Ratio 5.66
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $7,126,000,000
Total Current Liabilities $4,454,000,000
Long-Term Debt $7,685,000,000
Total Assets $22,819,000,000
Intangible Assets $5,252,000,000
Total Liabilities $16,538,000,000
Shares Outstanding (Diluted Average) 949,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.51
Dec2018 $2.55
Dec2017 -$0.95
Dec2016 $6.35
Dec2015 $1.42
Dec2014 $0.04
Dec2013 $2.18
Dec2012 $1.99
Dec2011 $2.46
Dec2010 $1.36
Dec2009 $1.83
Dec2008 $1.36
Dec2007 $0.25
Dec2006 $0.79
Dec2005 $0.78
Dec2004 $0.29
Dec2003 $0.34
Dec2002 $0.11
Dec2001 $0.08
Dec2000 $0.04
Dec1999 $0.01

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.27
Dec2018 $2.06
Dec2017 $1.81
Dec2016 $2.93
Dec2015 $1.35
Dec2014 $1.41
Dec2013 $2.05
Dec2012 $1.93
Dec2011 $1.75
Dec2010 $1.30
Dec2009 $1.18
Dec2008 $0.80
Dec2007 $0.51
Dec2006 $0.58
Dec2005 $0.42
Dec2004 $0.22
Dec2003 $0.16

Recommended Reading:

Other ModernGraham posts about the company

eBay Inc Valuation – May 2018 $EBAY
eBay Inc Valuation – December 2016 $EBAY
5 Speculative and Overvalued Companies to Avoid – August 2015
Ebay Inc. Analysis – August 2015 Update $EBAY
30 Companies in the Spotlight This Week – 5/23/15

Other ModernGraham posts about related companies

Facebook Inc Valuation – January 2019 $FB
Shutterstock Inc Valuation – August 2018 $SSTK
Twitter Inc Valuation – June 2018 $TWTR
Salesforce.com Inc Valuation – June 2018 $CRM
eBay Inc Valuation – May 2018 $EBAY
Facebook Inc Valuation – March 2018 $FB
Salesforce.com Inc Valuation – April 2017 $CRM
Paypal Holdings Inc Valuation – Initial Coverage $PYPL
Netflix Inc Valuation – February 2017 $NFLX
Shutterstock Inc Valuation – Initial Coverage $SSTK

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

eBay Inc Valuation – May 2018 $EBAY

Company Profile (excerpt from Reuters): eBay Inc. (eBay), incorporated on March 13, 1998, is a commerce company, which operates through its Marketplace, StubHub and Classifieds platforms. The Company connects buyers and sellers around the world. Its platforms enable sellers around the world to organize and offer their inventory for sale, and buyers to find and purchase it. The Company’s platforms are accessible through an online experience (desktop and laptop computers), from mobile devices (smartphones and tablets) and by application programming interface (API) (platform access for third-party software developers). The Company’s platform is based on open source technologies that enable software developers and merchants to access its APIs for developing software and solutions for commerce.

EBAY Chart

EBAY data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of EBAY – May 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $36,956,105,652 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.63 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 34.69% Pass
6. Moderate PEmg Ratio PEmg < 20 19.11 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.04 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.63 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.19 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.95
MG Growth Estimate 5.68%
MG Value $38.62
Opinion Fairly Valued
MG Grade D+
MG Value based on 3% Growth $28.21
MG Value based on 0% Growth $16.54
Market Implied Growth Rate 5.31%
Current Price $37.18
% of Intrinsic Value 96.28%

eBay Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years, and the poor dividend history, and the high PB ratio. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of earnings stability over the last five years, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $1.41 in 2014 to an estimated $1.95 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 5.31% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into eBay Inc revealed the company was trading above its Graham Number of $19.74. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 19.11, which was below the industry average of 148.17, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-9.91.

eBay Inc scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$9.91
Graham Number $19.74
PEmg 19.11
Current Ratio 2.63
PB Ratio 5.04
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $6,763,000,000
Total Current Liabilities $2,568,000,000
Long-Term Debt $9,208,000,000
Total Assets $24,555,000,000
Intangible Assets $4,868,000,000
Total Liabilities $16,959,000,000
Shares Outstanding (Diluted Average) 1,029,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.21
Dec2017 -$0.95
Dec2016 $6.35
Dec2015 $1.42
Dec2014 $0.04
Dec2013 $2.18
Dec2012 $1.99
Dec2011 $2.46
Dec2010 $1.36
Dec2009 $1.83
Dec2008 $1.36
Dec2007 $0.25
Dec2006 $0.79
Dec2005 $0.78
Dec2004 $0.57
Dec2003 $0.34
Dec2002 $0.22
Dec2001 $0.08
Dec2000 $0.04
Dec1999 $0.01
Dec1998 $0.01

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.95
Dec2017 $1.81
Dec2016 $2.93
Dec2015 $1.35
Dec2014 $1.41
Dec2013 $2.05
Dec2012 $1.93
Dec2011 $1.75
Dec2010 $1.30
Dec2009 $1.18
Dec2008 $0.82
Dec2007 $0.55
Dec2006 $0.64
Dec2005 $0.51
Dec2004 $0.34
Dec2003 $0.19
Dec2002 $0.10

Recommended Reading:

Other ModernGraham posts about the company

eBay Inc Valuation – December 2016 $EBAY
5 Speculative and Overvalued Companies to Avoid – August 2015
Ebay Inc. Analysis – August 2015 Update $EBAY
30 Companies in the Spotlight This Week – 5/23/15
eBay Inc. Quarterly Valuation – May 2015 $EBAY

Other ModernGraham posts about related companies

Facebook Inc Valuation – March 2018 $FB
Salesforce.com Inc Valuation – April 2017 $CRM
Paypal Holdings Inc Valuation – Initial Coverage $PYPL
Netflix Inc Valuation – February 2017 $NFLX
Shutterstock Inc Valuation – Initial Coverage $SSTK
Synchronoss Technologies Inc Valuation – Initial Coverage $SNCR
eBay Inc Valuation – December 2016 $EBAY
Facebook Inc Valuation – July 2016 $FB
Salesforce.com Valuation – January 2016 Update $CRM
Facebook Inc Valuation – January 2016 Update $FB

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

eBay Inc Valuation – December 2016 $EBAY

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – December 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how eBay Inc (EBAY) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): eBay Inc. (eBay) is a commerce company, which operates through its Marketplace, StubHub and Classifieds platforms. The Company helps in enabling commerce on its platforms for buyers and sellers online. The Company has an open source platform that provides software developers and merchants an access to its application programming interfaces for developing software and solutions for commerce. Its Marketplace platforms include its online marketplace located at www.ebay.com, localized counterparts and the eBay mobile applications. Its StubHub platforms include its online ticket platform located at www.stubhub.com and the StubHub mobile applications. Its StubHub platforms provide customers with a place to purchase tickets to the games, concerts and theater shows and also enable owners to sell the tickets. Its Classifieds platforms offer online classifieds with a collection of brands, such as Mobile.de, Kijiji, Gumtree, Marktplaats, eBay Classifieds and others.

EBAY Chart

EBAY data by YCharts

[level-free]
To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Recent valuations of the components of the Dow Jones Industrial Average are available for free members, including this one of Microsoft Corporation.  In addition, here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
[not-level-free]

Downloadable PDF version of this valuation:

ModernGraham Valuation of EBAY – December 2016

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $32,837,308,785 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.60 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -9.01% Fail
6. Moderate PEmg Ratio PEmg < 20 21.72 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.96 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.60 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.26 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Fail

Stage 2: Determination of Intrinsic Value

EPSmg $1.37
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $19.82
MG Value based on 0% Growth $11.62
Market Implied Growth Rate 6.61%
Current Price $29.69
% of Intrinsic Value N/A

eBay Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings growth over the last ten years, the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of earnings growth over the last five years, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $1.93 in 2012 to an estimated $1.37 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.61% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into eBay Inc revealed the company was trading above its Graham Number of $15.15. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 21.72, which was below the industry average of 158.7, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-3.42.

eBay Inc scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$3.42
Graham Number $15.15
PEmg 21.72
Current Ratio 2.60
PB Ratio 4.96
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

[/not-level-free]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2016
Total Current Assets $9,783,000,000
Total Current Liabilities $3,763,000,000
Long-Term Debt $7,582,000,000
Total Assets $20,502,000,000
Intangible Assets $4,844,000,000
Total Liabilities $13,683,000,000
Shares Outstanding (Diluted Average) 1,139,000,000

Earnings Per Share History

Next Fiscal Year Estimate $1.67
Dec2015 $1.42
Dec2014 $0.04
Dec2013 $2.18
Dec2012 $1.99
Dec2011 $2.46
Dec2010 $1.36
Dec2009 $1.83
Dec2008 $1.36
Dec2007 $0.25
Dec2006 $0.79
Dec2005 $0.78
Dec2004 $0.57
Dec2003 $0.34
Dec2002 $0.22
Dec2001 $0.08
Dec2000 $0.04
Dec1999 $0.01
Dec1998 $0.01
Dec1997 $0.01

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.37
Dec2015 $1.35
Dec2014 $1.41
Dec2013 $2.05
Dec2012 $1.93
Dec2011 $1.75
Dec2010 $1.30
Dec2009 $1.18
Dec2008 $0.82
Dec2007 $0.55
Dec2006 $0.64
Dec2005 $0.51
Dec2004 $0.34
Dec2003 $0.19
Dec2002 $0.10
Dec2001 $0.04
Dec2000 $0.02

Recommended Reading:

Other ModernGraham posts about the company

5 Speculative and Overvalued Companies to Avoid – August 2015
Ebay Inc. Analysis – August 2015 Update $EBAY
30 Companies in the Spotlight This Week – 5/23/15
eBay Inc. Quarterly Valuation – May 2015 $EBAY
17 Companies in the Spotlight This Week – 5/10/14

Other ModernGraham posts about related companies

Facebook Inc Valuation – July 2016 $FB
Salesforce.com Valuation – January 2016 Update $CRM
Facebook Inc Valuation – January 2016 Update $FB
Netflix Inc Valuation – November 2015 Update $NFLX
Facebook Inc. Analysis – August 2015 Update $FB
Ebay Inc. Analysis – August 2015 Update $EBAY
Facebook Stock Analysis – Quarterly Update May 2015 $FB
eBay Inc. Quarterly Valuation – May 2015 $EBAY
Facebook Inc. Quarterly Valuation – February 2015 $FB
Salesforce.com Inc. Annual Valuation – 2014 $CRM

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Ebay Inc. Analysis – August 2015 Update $EBAY

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Most Undervalued Companies for the Defensive Investor – August 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Ebay Inc. (EBAY) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): eBay Inc.(eBay) is a global technology company. The Company has created an open source platform that provides software developers and merchants access to its applications programming interfaces (APIs), to develop software and solutions for commerce. The Company enables commerce through three segments: Marketplaces, Payments and Enterprise. The Company’s Marketplaces segment includes its ebay.com platform and its localized counterparts and its other online platforms, such as its online classifieds sites and StubHub. The Company’s Payments segment consists of its PayPal business. Its Enterprise segment includes its Magento business and provides commerce technologies, omnichannel operations and marketing solutions for merchants of all sizes that operate in general merchandise categories.

[level-free]

To read the rest of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
[level-mg-stocks-screens-subscriber]

Downloadable PDF version of this valuation:

ModernGraham Valuation of EBAY

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end Pass
6. Moderate PEmg Ratio PEmg < 20 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 Pass
Score
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Fail

Stage 2: Determination of Intrinsic Value

EPSmg 1.33
MG Growth Estimate -3.58%
MG Value $2.20
Opinion Overvalued
MG Value based on 3% Growth $19.28
MG Value based on 0% Growth $11.30
Market Implied Growth Rate 6.38%
Current Price $28.26
% of Intrinsic Value 1284.07%

Ebay Inc. is not suitable for the more conservative Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the low current ratio, the lack of dividends, and high PEmg and PB ratios.  The Enterprising Investor is concerned by the lack of dividends and the lack of earnings growth over the last five years.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities or proceed with a cautious speculative attitude.

As for a valuation, the company appears to be overvalued after seeing its EPSmg (normalized earnings) decline from $1.75 in 2011 to an estimated $1.33 for 2015.  This level of demonstrated earnings growth does not support the market’s implied estimate of 6.38% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Ebay Inc. (EBAY)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Stage 3: Information for Further Research

EBAY Charts - August 2015

Net Current Asset Value (NCAV) $2.20
PEmg 21.26
Current Ratio 1.67
PB Ratio 1.75
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

 

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Total Current Assets $28,549,000,000
Total Current Liabilities $17,060,000,000
Long-Term Debt $6,757,000,000
Total Assets $45,658,000,000
Intangible Assets $8,185,000,000
Total Liabilities $25,853,000,000
Outstanding Shares 1,225,000,000

Earnings Per Share History

Next Fiscal Year Estimate $1.36
Dec14 $0.04
Dec13 $2.18
Dec12 $1.99
Dec11 $2.46
Dec10 $1.36
Dec09 $1.83
Dec08 $1.36
Dec07 $0.25
Dec06 $0.79
Dec05 $0.78
Dec04 $0.57
Dec03 $0.34
Dec02 $0.21
Dec01 $0.08
Dec00 $0.04
Dec99 $0.01

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.33
Dec14 $1.41
Dec13 $2.05
Dec12 $1.93
Dec11 $1.75
Dec10 $1.30
Dec09 $1.18
Dec08 $0.82
Dec07 $0.55
Dec06 $0.64
Dec05 $0.51
Dec04 $0.34
Dec03 $0.19
Dec02 $0.10
Dec01 $0.04
Dec00 $0.02

Recommended Reading:

Other ModernGraham posts about the company

30 Companies in the Spotlight This Week – 5/23/15
eBay Inc. Quarterly Valuation – May 2015 $EBAY
17 Companies in the Spotlight This Week – 5/10/14
eBay Inc. (EBAY) Annual Valuation – 2014
15 Companies in the Spotlight This Week – 2/1/14

Other ModernGraham posts about related companies

Facebook Stock Analysis – Quarterly Update May 2015 $FB
eBay Inc. Quarterly Valuation – May 2015 $EBAY
Facebook Inc. Quarterly Valuation – February 2015 $FB
Salesforce.com Inc. Annual Valuation – 2014 $CRM
Facebook Inc. Quarterly Valuation – November 2014 $FB
Netflix Inc. Annual Valuation – 2014 $NFLX
Facebook Inc. Quarterly Valuation – August 2014 $FB
Netflix Inc. Quarterly Valuation – August 2014 $NFLX
Facebook Inc. (FB) Quarterly Valuation – May 2014
Netflix Inc. (NFLX) Quarterly Valuation – May 2014

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  This is not investment advice and all readers should speak with a registered investment adviser prior to making any investment decision.  ModernGraham is not affiliated with the company in any manner.

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eBay Inc. Quarterly Valuation – May 2015 $EBAY

500px-EBay_logo.svgA lot of investors and analysts considering eBay (EBAY) are focused primarily on the upcoming PayPal spinoff. For example, Seeking Alpha contributor Daniel James recently considered the effects the spinoff may have on the core eBay business and Alex Cho argued that investors should consider owning both companies. However, it is critical when analyzing eBay to consider the company’s intrinsic value in relation to its price.

In fact, Benjamin Graham, the father of value investing, taught that the most important aspect to consider is whether a company is trading at a discount relative to its intrinsic value. It is through a thorough fundamental analysis that the investor is able to make a determination about a potential investment’s merits. Here’s a look at how the company fares in the ModernGraham valuation model.

The model is inspired by the teachings of Benjamin Graham and considers numerous metrics intended to help the investor reduce risk levels. The first part of the analysis is to determine whether the company is suitable for the very conservative Defensive Investor or the less conservative Enterprising Investor who is willing to spend a greater amount of time conducting further research.

In addition, Graham strongly suggested that investors avoid speculation in order to remove the subjective elements of emotion. This is best achieved by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another. By using the ModernGraham method, one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.

EBAY Chart

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Defensive Investor – Must pass at least 6 of the following 7 tests: Score = 3/7

  1. Adequate Size of Enterprise – Market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – Current ratio greater than 2 – FAIL
  3. Earnings Stability – Positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – Has paid a dividend for at least 10 straight years – FAIL
  5. Earnings Growth – Earnings per share has increased by at least 1/3 over the last 10 years, using 3-year averages at the beginning and end of the period – PASS
  6. Moderate PEmg (price over normalized earnings) Ratio – PEmg is less than 20 – FAIL
  7. Moderate Price-to-Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – Must pass at least 4 of the following 5 tests or be suitable for a Defensive Investor: Score = 4/5

  1. Sufficiently Strong Financial Condition, Part 1 – Current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt-to-Net Current Assets ratio less than 1.1 – PASS
  3. Earnings Stability – Positive earnings per share for at least 5 years – PASS
  4. Dividend Record – Currently pays a dividend – FAIL
  5. Earnings Growth – EPSmg greater than that 5 years ago – PASS

Valuation Summary

Key Data

Recent Price $59.97
MG Value $20.54
MG Opinion Overvalued
Value Based on 3% Growth $27.35
Value Based on 0% Growth $16.03
Market Implied Growth Rate 11.65%
Net Current Asset Value (NCAV) $0.99
PEmg 31.80
Current Ratio 1.51
PB Ratio 3.77

Balance Sheet – March 2015

Current Assets $26,514,000,000
Current Liabilities $17,611,000,000
Total Debt $6,795,000,000
Total Assets $44,841,000,000
Intangible Assets $9,446,000,000
Total Liabilities $25,303,000,000
Outstanding Shares 1,229,000,000


Earnings Per Share

2015 (estimate) $3.03
2014 $0.04
2013 $2.18
2012 $1.99
2011 $2.46
2010 $1.36
2009 $1.83
2008 $1.36
2007 $0.25
2006 $0.79
2005 $0.78


Earnings Per Share – ModernGraham

2015 (estimate) $1.89
2014 $1.41
2013 $2.05
2012 $1.93
2011 $1.75
2010 $1.30


Dividend History

eBay does not pay a dividend.

Conclusion

eBay passes the initial requirements of the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, the lack of dividends, and the high PEmg and PB ratios. The Enterprising Investor is only concerned by the lack of dividends. As a result, all value investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to valuation, it is critical to consider the company’s earnings history. In this case, the company has seen its EPSmg (normalized earnings) rise from $1.75 in 2011 to only an estimated $1.89 for 2015. This is a weak level of earnings growth, and does not support the market’s implied estimate for 11.65% annual growth over the next 7-10 years.

In fact, the recent earnings growth has averaged only 1.6% per year, so the market is expecting a very significant shift in earnings in order to justify the current price. The ModernGraham valuation model returns an estimate of intrinsic value falling below the market’s price, indicating that the company is overvalued at the present time.

Disclaimer: The author did not hold a position in any of the companies listed in this article at the time of publication and had no intention of changing that position within the next 72 hours. Logos taken from either the company website or Wikipedia; this article is not affiliated with the companies in any manner.

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eBay Inc. (EBAY) Annual Valuation – 2014

500px-EBay_logo.svgBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing 5 Undervalued Companies for the Defensive Investor Near 52 Week Lows.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how eBay Inc. (EBAY) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): eBay Inc., is a global technology company. The Company enables commerce through three reportable segments: Marketplaces, Payments, and GSI. The Company by providing online platforms, tools and services to help individuals and small, medium and merchants around the globe engage in online and mobile commerce and payments, the Company can facilitate transactions. The Company also generates revenue through marketing services, classifieds and advertising. The Company has also created an open source platform that provides software developers and merchants access to its applications programming interfaces (APIs), to develop software and solutions for commerce. Its developer community includes more than 800,000 members. In December 2013, the Company announced that it has completed the acquisition of acquisition of Braintree. Effective February 19, 2014, eBay Inc acquired PhiSix Inc.

EBAY Chart

EBAY data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 3/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – FAIL
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – PASS
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 3/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – FAIL
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – PASS
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – FAIL
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

MG Value $67.80
MG Opinion Fairly Valued
Value Based on 3% Growth $32.50
Value Based on 0% Growth $19.05
Market Implied Growth Rate 7.35%
Net Current Asset Value (NCAV) $1.12
PEmg 23.20
Current Ratio 1.42
PB Ratio 3.36

Balance Sheet – 3/31/2014

Current Assets $22,359,000,000
Current Liabilities $15,741,000,000
Total Debt $4,124,000,000
Total Assets $40,545,000,000
Intangible Assets $10,062,000,000
Total Liabilities $20,936,000,000
Outstanding Shares 1,267,000,000

Earnings Per Share

2014 (estimate) $2.53
2013 $2.18
2012 $1.99
2011 $2.46
2010 $1.36
2009 $1.83
2008 $1.36
2007 $0.25
2006 $0.79
2005 $0.78
2004 $0.57

Earnings Per Share – ModernGraham

2014 (estimate) $2.24
2013 $2.05
2012 $1.93
2011 $1.75
2010 $1.30
2009 $1.18

Conclusion:

eBay is not suitable for the Defensive Investor or the Enterprising Investor.  For the Defensive Investor, the concerns are the low current ratio, lack of dividend payments, and high PEmg and PB ratios.  The Enterprising Investor is concerned with the lack of dividend payments and low current ratio.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities through a review of 5 Undervalued Companies for the Defensive Investor and 5 Undervalued Companies for the Enterprising Investor.  From a valuation side of things, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $1.30 in 2010 to an estimated $2.24 for 2014.  This demonstrated level of growth supports the market’s implied estimate of 7.35% and leads the ModernGraham valuation model to return an estimate of intrinsic value that falls within a margin of safety relative to the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on eBay Inc. (EBAY)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

If you like our valuations, why not check out ModernGraham Stocks & Screens?  It’s a great way to review the valuations while screening for things like low PE ratio, undervalued companies, etc.!

Disclaimer:  The author did not hold a long position in eBay Inc. (EBAY) or any other company mentioned in the article at the time of publication and had no intention of changing that position within the next 72 hours.

Logo taken from wikipedia; this article is not affiliated with the company in any manner.

eBay Inc. (EBAY) Quarterly Valuation

500px-EBay_logo.svg

Technology companies tend to intrigue a great number of investors in today’s market, perhaps because there tends to be a great potential for profit due to the comparatively low capital expenditure needs.  However, Intelligent Investors following Benjamin Graham’s methods must take the time to analyze the fundamentals of the company utilizing the various requirements and metrics Graham proposed.  It is through this sort of analysis that investors are able to determine whether a given company presents opportunity for profit while requiring a low level of risk.  The ModernGraham analysis is intended to compile information in order to compare an investment opportunity against another, and what follows is a specific look at how eBay Inc. fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): eBay Inc. is a global technology company. The Company enables commerce through three reportable segments: Marketplaces, Payments, and GSI. The Company by providing online platforms, tools and services to help individuals and small, medium and merchants around the globe engage in online and mobile commerce and payments, the Company can facilitate transactions. The Company also generates revenue through marketing services, classifieds and advertising. The Company has also created an open source platform that provides software developers and merchants access to its applications programming interfaces (APIs), to develop software and solutions for commerce. Its developer community includes more than 800,000 members. In December 2013, the Company announced that it has completed the acquisition of acquisition of Braintree.
EBAY Chart

EBAY data by YCharts

 

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 3/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – FAIL
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – PASS
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 4/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – PASS
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – PASS
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – FAIL
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

MG Value $64.66
MG Opinion Fairly Valued
Value Based on 3% Growth $30.05
Value Based on 0% Growth $17.62
Market Implied Growth Rate 8.38%
Net Current Asset Value (NCAV) $4.77
PEmg 25.27
Current Ratio 1.95
PB Ratio 2.98

Balance Sheet – 9/30/2013

Current Assets $23,476,000,000
Current Liabilities $12,028,000,000
Total Debt $4,123,000,000
Total Assets $40,067,000,000
Intangible Assets $9,429,000,000
Total Liabilities $17,300,000,000
Outstanding Shares 1,294,000,000

Earnings Per Share

2013 $2.24
2012 $1.99
2011 $2.46
2010 $1.36
2009 $1.83
2008 $1.36
2007 $0.25
2006 $0.79
2005 $0.78
2004 $0.57
2003 $0.34

Earnings Per Share – ModernGraham 

2013 $2.07
2012 $1.93
2011 $1.75
2010 $1.30
2009 $1.18
2008 $0.82

Conclusion:

eBay appears to be a very solid company that should intrigue value investors that classify themselves as Enterprising Investors.  The company does not qualify for the Defensive Investor due to the current ratio not quite reaching the 2.0 requirement, the lack of dividend payments, and the high PEmg and PB ratios.  The Enterprising Investor is much more interested, as the company only fails the dividend requirement.  This investor type should feel very comfortable proceeding with further research to determine whether the company would be a good fit for their individual portfolios.  Such research should include a comparison against some of eBay’s competitors, perhaps starting with a review of ModernGraham’s valuation of Amazon (AMZN) and ModernGraham’s valuation of Google (GOOG).  From a valuation perspective, eBay has grown its EPSmg (normalized earnings) from $0.82 in 2008 to $2.07 in 2013.  This is a very strong level of growth that definitely supports the market’s implied estimate of 8.38% growth and the market price falls within the ModernGraham valuation model’s margin of safety.  As a result, the company appears to be fairly valued at the current time.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on eBay Inc. (EBAY)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

If you like our valuations, why not check out ModernGraham Stocks & Screens?  It’s a great way to review the valuations while screening for things like low PE ratio, undervalued companies, etc.!

Disclaimer:  The author did not hold a position in eBay Inc. (EBAY) or any of the other companies listed in this article at the time of publication and had no intention of changing that position within the next 72 hours.

Logo taken from the Wikipedia; this article is not affiliated with the company in any manner.

Twitter Inc Valuation – April 2019 #TWTR

Company Profile (excerpt from Reuters): Twitter, Inc. (Twitter), incorporated on April 19, 2007, offers products and services for users, advertisers, developers and data partners. The Company’s products and services include Twitter, Periscope, Promoted Tweets, Promoted Accounts and Promoted Trends.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of TWTR – April 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $26,509,140,015 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 4.69 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -183.13% Fail
6. Moderate PEmg Ratio PEmg < 20 76.76 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.94 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 4.69 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.31 Pass
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.45
MG Growth Estimate 15.00%
MG Value $17.33
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $6.53
MG Value based on 0% Growth $3.83
Market Implied Growth Rate 34.13%
Current Price $34.54
% of Intrinsic Value 199.37%

Twitter Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the lack of earnings stability over the last five years, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $-1.4 in 2015 to an estimated $0.45 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 34.13% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Twitter Inc revealed the company was trading above its Graham Number of $11.08. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 76.76, which was above the industry average of 33.53. Finally, the company was trading above its Net Current Asset Value (NCAV) of $4.84.

Twitter Inc scores quite poorly in the ModernGraham grading system, with an overall grade of F.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $4.84
Graham Number $11.08
PEmg 76.76
Current Ratio 4.69
PB Ratio 3.94
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $7,111,036,000
Total Current Liabilities $1,516,311,000
Long-Term Debt $1,730,922,000
Total Assets $10,162,572,000
Intangible Assets $1,272,294,000
Total Liabilities $3,356,978,000
Shares Outstanding (Diluted Average) 776,211,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.61
Dec2018 $1.56
Dec2017 -$0.15
Dec2016 -$0.65
Dec2015 -$0.79
Dec2014 -$0.96
Dec2013 -$3.41
Dec2012 -$0.68
Dec2011 -$1.60
Dec2010 -$0.15

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.45
Dec2018 $0.18
Dec2017 -$0.74
Dec2016 -$1.12
Dec2015 -$1.40
Dec2014 -$1.59
Dec2013 -$1.66
Dec2012 -$0.68
Dec2011 -$0.57
Dec2010 -$0.05

Recommended Reading:

Other ModernGraham posts about the company

Twitter Inc Valuation – June 2018 $TWTR

Other ModernGraham posts about related companies

eBay Inc Valuation – February 2019 $EBAY
Facebook Inc Valuation – January 2019 $FB
Shutterstock Inc Valuation – August 2018 $SSTK
Twitter Inc Valuation – June 2018 $TWTR
Salesforce.com Inc Valuation – June 2018 $CRM
eBay Inc Valuation – May 2018 $EBAY
Facebook Inc Valuation – March 2018 $FB
Salesforce.com Inc Valuation – April 2017 $CRM
Paypal Holdings Inc Valuation – Initial Coverage $PYPL
Netflix Inc Valuation – February 2017 $NFLX

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

United Parcel Service Inc Valuation – March 2019 #UPS

Company Profile (excerpt from Reuters): United Parcel Service, Inc. (UPS), incorporated on July 15, 1999, is a package delivery company. The Company is a provider of global supply chain management solutions. The Company operates through three segments: U.S. Domestic Package operations, International Package operations, and Supply Chain & Freight operations. As of December 31, 2016, the Company delivered packages in over 220 countries and territories. WorldShip, a desktop shipping application of UPS, provides middle-market and customers with shipping capabilities. Customers can create custom labels, set up shipment alerts, create and upload customs documentation, track and export shipments, create reports and integrate with their enterprise resource planning and accounting systems to streamline shipping with real-time connectivity. UPS marketplace shipping, which integrates www.ups.com with eBay, Amazon, Etsy and BigCommerce, allows marketplace sellers to ship their orders through www.ups.com or WorldShip. UPS marketplace shipping provides shipment processing, multiple payment options (including PayPal), order and shipment history and automatic tracking updates. The Company serves the global market for logistics services, which include transportation, distribution, contract logistics, ground freight, ocean freight, air freight, customs brokerage, insurance and financing.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of UPS – March 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $74,248,106,732 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.15 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 130.38% Pass
6. Moderate PEmg Ratio PEmg < 20 18.08 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 30.56 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.15 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 9.20 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $5.90
MG Growth Estimate 7.42%
MG Value $137.71
Opinion Fairly Valued
MG Grade C-
MG Value based on 3% Growth $85.54
MG Value based on 0% Growth $50.14
Market Implied Growth Rate 4.79%
Current Price $106.68
% of Intrinsic Value 77.47%

United Parcel Service, Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PB ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $3.95 in 2015 to an estimated $5.9 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 4.79% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into United Parcel Service, Inc. revealed the company was trading above its Graham Number of $24.06. The company pays a dividend of $3.64 per share, for a yield of 3.4%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 18.08, which was below the industry average of 18.91, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-35.37.

United Parcel Service, Inc. receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$35.37
Graham Number $24.06
PEmg 18.08
Current Ratio 1.15
PB Ratio 30.56
Current Dividend $3.64
Dividend Yield 3.41%
Number of Consecutive Years of Dividend Growth 9

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $16,210,000,000
Total Current Liabilities $14,087,000,000
Long-Term Debt $19,537,000,000
Total Assets $50,016,000,000
Intangible Assets $5,887,000,000
Total Liabilities $46,979,000,000
Shares Outstanding (Diluted Average) 870,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $7.31
Dec2018 $5.51
Dec2017 $5.61
Dec2016 $3.86
Dec2015 $5.35
Dec2014 $3.28
Dec2013 $4.61
Dec2012 $0.83
Dec2011 $3.84
Dec2010 $3.33
Dec2009 $2.14
Dec2008 $2.94
Dec2007 $0.36
Dec2006 $3.86
Dec2005 $3.47
Dec2004 $2.93
Dec2003 $2.55
Dec2002 $2.81
Dec2001 $2.10
Dec2000 $2.50
Dec1999 $0.77

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.90
Dec2018 $5.04
Dec2017 $4.71
Dec2016 $4.04
Dec2015 $3.95
Dec2014 $3.22
Dec2013 $3.11
Dec2012 $2.45
Dec2011 $3.01
Dec2010 $2.57
Dec2009 $2.32
Dec2008 $2.51
Dec2007 $2.40
Dec2006 $3.33
Dec2005 $2.96
Dec2004 $2.67
Dec2003 $2.40

Recommended Reading:

Other ModernGraham posts about the company

United Parcel Service Inc Valuation – May 2018 $UPS
United Parcel Service Inc Valuation – February 2017 $UPS
United Parcel Service Inc. Valuation – October 2015 Update $UPS
27 Companies in the Spotlight This Week – 11/8/14
United Parcel Service Inc. Annual Valuation – 2014 $UPS

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United Parcel Service Inc Valuation – May 2018 $UPS
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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Facebook Inc Valuation – January 2019 $FB

Company Profile (excerpt from Reuters): Facebook, Inc., incorporated on July 29, 2004, is focused on building products that enable people to connect and share through mobile devices, personal computers and other surfaces. The Company also enables people to discover and learn about what is going on in the world around them, enables people to share their opinions, ideas, photos and videos, and other activities with audiences ranging from their friends to the public, and stay connected by accessing its products. The Company’s products include Facebook, Instagram, Messenger, WhatsApp and Oculus. The Company also engages in selling advertising placements to marketers. Its advertisements let marketers reach people based on a range of factors, including age, gender, location, interests and behaviors. Marketers purchase advertisements that can appear in multiple places, including on Facebook, Instagram, and third-party applications and Websites.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of FB – January 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $431,182,982,185 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 9.00 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 2059.46% Pass
6. Moderate PEmg Ratio PEmg < 20 31.61 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.44 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 9.00 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.75
MG Growth Estimate 15.00%
MG Value $182.77
Opinion Fairly Valued
MG Grade C+
MG Value based on 3% Growth $68.84
MG Value based on 0% Growth $40.35
Market Implied Growth Rate 11.55%
Current Price $150.04
% of Intrinsic Value 82.09%

Facebook, Inc. Common Stock is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor is only concerned with the lack of dividends. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $0.61 in 2014 to an estimated $4.75 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 11.55% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Facebook, Inc. Common Stock revealed the company was trading above its Graham Number of $63.93. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 31.61, which was below the industry average of 91.28, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $12.71.

Facebook, Inc. Common Stock receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $12.71
Graham Number $63.93
PEmg 31.61
Current Ratio 9.00
PB Ratio 5.44
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

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Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $49,147,000,000
Total Current Liabilities $5,462,000,000
Long-Term Debt $0
Total Assets $92,452,000,000
Intangible Assets $19,755,000,000
Total Liabilities $12,110,000,000
Shares Outstanding (Diluted Average) 2,913,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $7.10
Dec2017 $5.39
Dec2016 $3.49
Dec2015 $1.29
Dec2014 $1.10
Dec2013 $0.60
Dec2012 $0.01
Dec2011 $0.46
Dec2010 $0.28

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.75
Dec2017 $3.17
Dec2016 $1.81
Dec2015 $0.88
Dec2014 $0.61
Dec2013 $0.33
Dec2012 $0.18
Dec2011 $0.23
Dec2010 $0.09

Recommended Reading:

Other ModernGraham posts about the company

Facebook Inc Valuation – March 2018 $FB
Facebook Inc Valuation – July 2016 $FB
Facebook Inc Valuation – January 2016 Update $FB
Facebook Inc. Analysis – August 2015 Update $FB
Facebook Stock Analysis – Quarterly Update May 2015 $FB

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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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