![Facebook Cheaper than Yahoo but more Expensive than Google [ANALYSIS] Facebook Cheaper than Yahoo but more Expensive than Google [ANALYSIS]](https://www.valuewalk.com/wp-content/uploads/2017/03/Yahoo_1489094847.jpg)
Facebook, Inc (NASDAQ:FB) has lost many friends; insiders are selling their stake in the company. On Thursday when the lock-up expired 157.6 million shares traded.

Another 1.5 billion shares and stock options will unlock from October 15-November 14 threatening to drive the stock price even lower than its current price which is hovering at $19 (half its IPO price).
Amid the turmoil in the public markets and the staggering macroeconomic environment, it should come as no surprise that the private markets are also struggling. In fact, there are some important links between private equity and the current economic environment. A closer look at PE reveals that the industry often serves as a leading indicator Read More
Fundamental Analysis
Relative Valuation
Valuation Drivers
Operations Diagnostic
Earnings Leverage
Sustainability of Returns
Drivers of Margin
Growth Expectations
Leverage & Liquidity
Overview
- Facebook, Inc.’s current Price/Book of 3.1 is about median in its peer group.
- The market expects faster earnings growth from FB-US than from its peers and also a turnaround in its current ROE.
- FB-US’s relatively low net margins and poor asset turns suggest a problematic operating strategy.
- The company’s year-on-year change in revenues and earnings are better than the median among its peer group.
- Over the last five years, FB-US’s return on assets has declined from about median to less than the median among its peers suggesting that the company’s historical competitiveness in operations is slipping away.
- The company’s relatively high pre-tax margin suggests tight control on operating costs versus peers.
- Compared with the peers chosen, FB-US has had faster revenue growth in prior years and a current PE ratio that suggests faster growth in the future suggesting superior growth expectations.
- FB-US has the financial and operating capacity to borrow quickly.
FB-US has traded publicly for less than a year.
Drivers of Valuation: Operations or Expectations?
Valuation (P/B) = Operating Advantage (ROE) * Growth Expectations (P/E)
FB-US has a Turnaround profile relative to its peers.
Operations Diagnostic
FB-US’s relatively low net margins and poor asset turns suggest a problematic operating strategy.
Earnings Leverage
Year-on-year change in revenues and earnings are above the median among its peers.
Sustainability of Returns
Relative to peers, recent returns have declined versus last five years.
Drivers of Margin
Relatively high pre-tax margin suggests tight control on operating costs versus peers.
Growth Expectations
FB-US’s revenue growth and share price suggest faster growth in the future.
Key Valuation Items
Company | Market Cap(mn) | Price / Book | Price / Earnings | Dividend Yield (%) |
---|---|---|---|---|
Microsoft Corp. | 259,047.0 | 3.9 | 15.5 | 2.6 |
Google Inc. Cl A | 221,447.0 | 3.4 | 19.1 | 0.0 |
Yahoo! Inc. | 17,804.8 | 1.4 | 17.1 | 0.0 |
LinkedIn Corporation | 10,714.3 | 13.7 | 846.8 | 0.0 |
IAC/InterActiveCorp. | 4,582.0 | 2.4 | 25.4 | 0.7 |
Renren Inc. Cl A ADS | 1,036.1 | 0.9 | 53.7 | 0.0 |
Facebook, Inc. | 40,812.1 | 3.1 | 83.6 | 0.0 |
Peer Median | 17,804.8 | 3.1 | 25.4 | 0.0 |
Best In Class | 259,047.0 | 13.7 | 846.8 | 2.6 |
Company Profile
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