Understanding eBay's Fundamentals Before Investing in its Stocks

eBay logged a -5.9% change during today's afternoon session, and is now trading at a price of $40.92 per share.

eBay returned losses of -10.9% last year, with its stock price reaching a high of $49.66 and a low of $37.17. Over the same period, the stock underperformed the S&P 500 index by -32.3%. AThe company's 50-day average price was $42.18. eBay Inc. operates marketplace platforms that connect buyers and sellers in the United States and internationally. Based in San Jose, CA, the large-cap Consumer Discretionary company has 11,600 full time employees. eBay has offered a 2.2% dividend yield over the last 12 months.

Exceptional EPS Growth Obtained Primarily Through Share Buybacks:

2018 2019 2020 2021 2022 2023
Revenue (MM) $8,650 $7,429 $8,894 $10,420 $9,795 $10,060
Revenue Growth n/a -14.12% 19.72% 17.16% -6.0% 2.71%
Gross Margins 77% 79% 80% 75% 73% 72%
Operating Margins 20% 24% 30% 28% 24% 21%
Net Margins 28% 24% 64% 131% -13% 27%
Net Income (MM) $2,530 $1,786 $5,667 $13,608 -$1,269 $2,715
Net Interest Expense (MM) $326 $311 $304 $269 $235 $242
Depreciation & Amort. (MM) $635 $600 $583 $502 $442 $412
Earnings Per Share $0.27 $2.09 $7.89 $20.54 -$2.27 $4.92
EPS Growth n/a 674.07% 277.51% 160.33% -111.05% 316.74%
Diluted Shares (MM) 9,500 812 697 606 558 532
Free Cash Flow (MM) $2,035 $2,606 $1,956 $2,213 $1,805 $2,505
Capital Expenditures (MM) $623 $508 $463 $444 $449 $483
Current Ratio 1.6 1.16 1.8 1.97 2.18 2.16
Total Debt (MM) $9,231 $7,758 $7,746 $9,082 $8,871 $750
Net Debt / EBITDA 2.94 2.89 2.06 2.25 2.41 -0.72

eBay has an excellent current ratio of 2.16, rapidly growing revenues and decreasing reinvestment in the business, and wider gross margins than its peer group. The company also benefits from strong operating margins with a stable trend, generally positive cash flows, and healthy leverage levels. However, the firm has exceptional EPS growth obtained primarily through share buybacks.

eBay Is Too Expensive at Current Levels:

eBay has a trailing twelve month P/E ratio of 8.5, compared to an average of 22.96 for the Consumer Discretionary sector. Based on its EPS guidance of $4.35, the company has a forward P/E ratio of 9.7. According to the 48.7% compound average growth rate of eBay's historical and projected earnings per share, the company's PEG ratio is 0.17. Taking the weighted average of the company's EPS CAGR and the broader market's 5-year projected EPS growth rate, we obtain a normalized growth rate of 11.3%. On this basis, the company's PEG ratio is 0.75. This suggests that its shares are undervalued. Additionally, the market is possibly undervaluing eBay in terms of its equity because its P/B ratio is 3.61 whereas the sector average is 4.24. The company's shares are currently trading -14.4% below their Graham number.

There's an Analyst Consensus of Some Upside Potential for eBay:

The 25 analysts following eBay have set target prices ranging from $32.0 to $56.0 per share, for an average of $45.45 with a hold rating. The company is trading -10.0% away from its average target price, indicating that there is an analyst consensus of some upside potential.

eBay has an average amount of shares sold short because 5.5% of the company's shares are sold short. Institutions own 89.9% of the company's shares, and the insider ownership rate stands at 0.25%, suggesting a small amount of insider investors. The largest shareholder is Vanguard Group Inc, whose 12% stake in the company is worth $2,453,397,350.

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.