Why Are Analysts Bullish on Coinbase Global (COIN)?

Most analysts love Coinbase Global, which has an average rating of buy. But there's reason to believe the stock may be overvalued at today's price of $76.56 per share. Let's look at the fundamentals ourselves and see if we reach a different conclusion than the analyst community.

Coinbase Global has a P/E ratio of -14.0 based on its 12 month trailing earnings per share of $-5.48. Considering its future earnings estimates of $-0.02 per share, the stock's forward P/E ratio is -3828.2. In comparison, the average P/E ratio of the Finance sector is 14.34 and the average P/E ratio of the S&P 500 is 15.97.

We can also compare the ratio of Coinbase Global'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 equity value -- or what is left over when we subtract its liabilities from its assets. COIN has a P/B ratio of 3.15, with any figure close to or below one indicating a potentially undervalued company.

A comparison of the share price versus company earnings and book value should be balanced by an analysis of the company's ability to pay its liabilities. One popular metric is the Quick Ratio, or Acid Test, which is the company's current assets minus its inventory and prepaid expenses divided by its current liabilities. Coinbase Global's quick ratio is 0.043. Generally speaking, a quick ratio above 1 signifies that the company is able to meet its liabilities.

The last factor we will review in our value analysis of Coinbase Global is its levered free cash flow, which is negative at $-1643607000. The levered free cash flow represents the sum of all of the company's inflows and outflows of capital in the last quarter. A negative value means that Coinbase Global has no cash left over to re-invest in the business or to pay equity investors in the form of a dividend.

At Market Inference, we will keep monitoring Coinbase Global 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.

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.