Diversified Financial company Coinbase Global is taking Wall Street by surprise today, falling to $200.92 and marking a -4.5% change compared to the S&P 500, which moved 0.0%. COIN is 50130.0% above its average analyst target price of $0.4, which implies future downside for the stock. Indeed, the average analyst rating for the stock is hold, showing a rather gloomy outlook. Over the last year, Coinbase Global shares have outstripped the S&P 500 by 204.4%, with a price change of 230.6%.
Coinbase Global, Inc. provides financial infrastructure and technology for the crypto economy 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's trailing 12 month P/E ratio is 39.4, based on its trailing EPS of $5.1. The company has a forward P/E ratio of 47.3 according to its forward EPS of $4.25 -- which is an estimate of what its earnings will look like in the next quarter. The P/E ratio is the company's share price divided by its earnings per share. In other words, it represents how much investors are willing to spend for each dollar of the company's earnings (revenues minus the cost of goods sold, taxes, and overhead). As of the first quarter of 2023, the finance sector has an average P/E ratio of 12.38, and the average for the S&P 500 is 15.97.
To deepen our understanding of the company's finances, we should study the effect of its depreciation and capital expenditures on the company's bottom line. We can see the effect of these additional factors in Coinbase Global's free cash flow, which was $922.95 Million as of its most recent 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 $913.37 Million and they've been growing at an average rate of -24.7%.
Value investors often analyze stocks through the lens of its Price to Book (P/B) Ratio (its share price divided by its book value). The book value refers to the present value of the company if the company were to sell off all of its assets and pay all of its debts today - a number whose value may differ significantly depending on the accounting method. Coinbase global's P/B ratio is 6.11 -- in other words, the market value of the company exceeds its book value by a factor of more than 6, 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.
Coinbase Global is likely overvalued at today's prices because it has a higher P/E ratio than its sector average, a higher than Average P/B Ratio, and positive cash flows with a downwards trend. The stock has poor growth indicators because of its with a negative growth trend, and an inflated PEG ratio. We hope this preliminary analysis will encourage you to do your own research into COIN's fundamental values -- especially their trends over the last few years, which provide the clearest picture of the company's valuation.
