Essential Facts About Meta Platforms

We've been asking ourselves recently if the market has placed a fair valuation on Meta Platforms. Let's dive into some of the fundamental values of this large-cap Technology company to determine if there might be an opportunity here for value-minded investors.

Meta Platforms's Valuation Is in Line With Its Sector Averages:

Meta Platforms, Inc. engages in the development of products that enable people to connect and share with friends and family through mobile devices, personal computers, virtual reality headsets, and wearables worldwide. The company belongs to the Technology sector, which has an average price to earnings (P/E) ratio of 27.16 and an average price to book (P/B) ratio of 6.23. In contrast, Meta Platforms has a trailing 12 month P/E ratio of 34.4 and a P/B ratio of 5.91.

When we divideMeta Platforms's P/E ratio by its expected five-year EPS growth rate, we obtain a PEG ratio of 0.74, which indicates that the market is undervaluing the company's projected growth (a PEG ratio of 1 indicates a fairly valued company). Your analysis of the stock shouldn't end here. Rather, a good PEG ratio should alert you that it may be worthwhile to take a closer look at the stock.

The Business Has Operating Margins Consistently Higher Than the 21.81% industry Average:

2018-02-01 2019-01-31 2020-01-30 2021-01-28 2022-02-03 2023-02-02
Revenue (MM) $40,653 $55,838 $70,697 $85,965 $117,929 $116,609
Gross Margins 87.0% 83.0% 82.0% 81.0% 81.0% 78.0%
Operating Margins 50% 45% 34% 38% 40% 25%
Net Margins 39.0% 40.0% 26.0% 34.0% 33.0% 20.0%
Net Income (MM) $15,934 $22,112 $18,485 $29,146 $39,370 $23,200
Earnings Per Share $5.39 $7.57 $6.43 $10.09 $13.77 $8.59
EPS Growth n/a 40.45% -15.06% 56.92% 36.47% -37.62%
Diluted Shares (MM) 2,956 2,921 2,876 2,888 2,859 2,702
Free Cash Flow (MM) $30,949 $43,189 $51,416 $53,862 $76,250 $81,661
Capital Expenditures (MM) -$6,733 -$13,915 -$15,102 -$15,115 -$18,567 -$31,186
Net Current Assets (MM) n/a n/a n/a n/a n/a -$465
Long Term Debt (MM) n/a n/a n/a n/a n/a $9,923

Meta Platforms has strong margins with a negative growth trend, a pattern of improving cash flows, and an excellent current ratio. The company also benefits from healthy debt levels, wider gross margins than its peer group, and positive EPS growth. Furthermore, Meta Platforms has weak revenue growth and a flat capital expenditure trend.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.