Standing out among the Street's worst performers today is Coinbase Global, a diversified financial company whose shares slumped -8.0% to a price of $261.33, 32.17% below its average analyst target price of $385.27.
The average analyst rating for the stock is buy. COIN lagged the S&P 500 index by -7.0% so far today and by -27.0% over the last year, returning -12.7%.
Coinbase Global, Inc. operates platform for crypto assets 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 22.6, based on its trailing EPS of $11.56. The company has a forward P/E ratio of 36.5 according to its forward EPS of $3.57 -- 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 finance companies is 15.92, 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.
When we subtract capital expenditures from operating cash flows, we are left with the company's free cash flow, which for Coinbase Global was $2.56 Billion as of its last annual report. This represents the amount of money that is available for reinvesting in the business, or for paying out to investors in the form of a dividend. With its strong cash flows, COIN is in a position to do either -- which can encourage more investors to place their capital in the company. Over the last four years, the company's free cash flow has been growing at a rate of 97.7% and has on average been $1.02 Billion.
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 4.38 -- 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 1.78 as of the third quarter of 2024.
Since it has a higher P/E ratio than its sector average, an average P/B ratio, and generally positive cash flows with an upwards trend, Coinbase Global is likely overvalued at today's prices. The company has strong growth indicators because of an above average PEG ratio and strong operating margins with a positive growth rate. 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.
