Standing out among the Street's worst performers today is Uber Technologies, a business services company whose shares slumped -5.9% to a price of $68.95, 22.89% below its average analyst target price of $89.42.
The average analyst rating for the stock is buy. UBER underperformed the S&P 500 index by -6.0% during today's morning session, but outpaced it by 4.7% over the last year with a return of 33.8%.
Uber Technologies, Inc. develops and operates proprietary technology applications in the United States, Canada, Latin America, Europe, the Middle East, Africa, and Asia excluding China and Southeast Asia. The company is a consumer cyclical company, whose sales figures depend on discretionary income levels in its consumer base. For this reason, consumer cyclical companies have better sales and stock performance during periods of economic growth, when consumers have more of an incentive to spend their money on non-essential items.
Uber Technologies's trailing 12 month P/E ratio is 34.0, based on its trailing EPS of $2.03. The company has a forward P/E ratio of 21.8 according to its forward EPS of $2.36 -- which is an estimate of what its earnings will look like in the next quarter. As of the third quarter of 2024, the average Price to Earnings (P/E) ratio for US consumer discretionary companies is 22.6, and the S&P 500 has an average of 29.3. 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.
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 Uber Technologies's free cash flow, which was $3.36 Billion 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 UBER's case the cash flow outlook is weak. It's average cash flow over the last 4 years has been $-1226666666.7 and they've been growing at an average rate of 21.1%.
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. Uber technologies's P/B ratio is 9.82 -- in other words, the market value of the company exceeds its book value by a factor of more than 9, so the company's assets may be overvalued compared to the average P/B ratio of the Consumer Discretionary sector, which stands at 3.19 as of the third quarter of 2024.
Since it has a higher P/E ratio than its sector average, a higher than Average P/B Ratio, and negative cash flows with an upwards trend, Uber Technologies is likely overvalued at today's prices. The company has poor growth indicators because of an inflated PEG ratio and weak operating margins with a stable trend. We hope you enjoyed this overview of UBER's fundamentals. Be sure to check the numbers for yourself, especially focusing on their trends over the last few years.
