With an average analyst rating of buy, DoorDash is clearly an analyst favorite. But the analysts could be wrong. Is DASH overvalued at today's price of $59.9? Let's take a closer look at the fundamentals to find out.
The most common valuation metric for stocks is the trailing price to earnings (P/E) ratio. DoorDash has a P/E ratio of -16.02 based on its 12 month trailing earnings per share of $-3.74. Considering its future earnings estimates of $-1.34 per share, the stock's forward P/E ratio is -44.7. In comparison, the average P/E ratio of the Industrials sector is 20.49 and the average P/E ratio of the S&P 500 is 15.97.
We can also compare the ratio of DoorDash's market price to its book value, which gives us the price to book, or P/B ratio. A company's book value refers to its present liquidation value -- or what would be left if the company sold off all its assets and paid off all of its debts today. DASH has a P/B ratio of 3.328, with any figure close to or below one indicating a potentially undervalued company.
Next up in our analysis is DoorDash's levered free cash flow, which stands at $21 Million. This represents the cash that is available to the company after all of its expenses and income are accounted for -- including those that arise outside of its core business activities. This money can be used to re-invest in the business or to payout a dividend. For now, at least, DoorDash has chosen the former.
At Market Inference, we will keep monitoring DoorDash to see if the analysts were right to recommend the stock despite its valuation issues. We recognize that numbers don't always tell the whole story, and that qualitative factors often set high performing investments apart from the rest.