Standing out among the Street's worst performers today is Coinbase Global, a diversified financial company whose shares slumped -3.7% to a price of $119.73, 29102.44% above its average analyst target price of $0.41.
The average analyst rating for the stock is buy. COIN underperformed the S&P 500 index by -5.0% during today's afternoon session, but outpaced it by 105.1% over the last year with a return of 125.4%.
Coinbase Global, Inc. provides financial infrastructure and technology for the cryptoeconomy in the United States and internationally. The company is part of the financial services sector, alongside a staggering variety of banking, mortgage, insurance,and credit service companies. If there is one common denominator among all companies in the sector, it’s that they are all dedicated to maintaining and developing new systems for the storage and transfer of value and risk.
Coinbase Global does not publish either its forward or trailing P/E ratios because their values are negative -- meaning that each share of stock represents a net earnings loss. But we can calculate these P/E ratios anyways using the stocks forward and trailing (EPS) values of $-0.02 and $-3.2. We can see that COIN has a forward P/E ratio of -5986.5 and a trailing P/E ratio of -37.4. As of the first quarter of 2023, the average Price to Earnings (P/E) ratio for US finance companies is 12.38, and the S&P 500 has an average of 15.97. The P/E ratio consists in the stock's share price divided by its earnings per share (EPS), representing how much investors are willing to spend for each dollar of the company's earnings. Earnings are the company's revenues minus the cost of goods sold, overhead, and taxes.
When we subtract capital expenditures from operating cash flows, we are left with the company's free cash flow, which for Coinbase Global was $182.42 Million as of its last annual report. Free cash flow represents the amount of money available for reinvestment in the business or for payments to equity investors in the form of a dividend. In COIN's case the cash flow outlook is weak. It's average cash flow over the last 4 years has been $728.24 Million and they've been growing at an average rate of -41.8%.
Another valuation metric for analyzing a stock is its Price to Book (P/B) Ratio, which consists in its share price divided by its book value per share. The book value refers to the present liquidation value of the company, as if it sold all of its assets and paid off all debts). Coinbase global's P/B ratio is 4.84 -- in other words, the market value of the company exceeds its book value by a factor of more than 4, so the company's assets may be overvalued compared to the average P/B ratio of the Finance sector, which stands at 1.58 as of the first quarter of 2023.
Since it has a negative P/E ratio, an elevated P/B ratio, and positive cash flows with a downwards trend, Coinbase Global is likely overvalued at today's prices. The company has poor growth indicators because of a negative PEG ratio and consistently negative margins with a negative growth trend. We hope you enjoyed this overview of COIN's fundamentals. Be sure to check the numbers for yourself, especially focusing on their trends over the last few years.
