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Is Ebay Fairly Priced?

Ebay (NASDAQ:EBAY) is a large cap stock with a market capitalization of $40.55 billion. The company is a commerce company, which operates through its Marketplace, StubHub and Classifieds platforms.
Ebay is located to the special retail industry, a part of the services sector. The biggest competitors are Amazon (NASDAQ:AMZN), Etsy (NASDAQ:ETSY) and Wayfair (NYSE:W). Here is a full list of my peer holdings for ebay:

Ebay Peer

The ebay stock is up 41.14% over the past year which is a clear outperformance compared to the S&P 500, Dow Jones and Nasdaq. 

NASDAQ EBAY  Peer PerformanceSource:

EBAY outperformed the market in recent months. Is it now a good time to buy, not to buy, wait or sell the stock? In this article, I will check the financial and valuation figures of the company and give a clear statement to the current situation.

I developed a simple system to evaluate the financial health of a company. It looks at the following six key metrics...

- Profitability (+)

The profitability of EBAY is good. The operating margin of EBAY amounts to 24.90% compared to 12.58% of the peer average.

Ebay Peer Margin

- Debt Situation (-)

I use the debt-to-equity ratio as qualified measure to evaluate the debt situation.

The debt-to-equity ratio for Ebay amounted to 0.77. Compared to the peer ratio of just 0.6, the online auction company seems to be working with a higher leverage, which is in general bad due to a higher financial risk.

Ebay Peer Debt

- Dividend Yield (-)

Ebay pays no dividends. The peer average offers a ratio of 0.21%. Most of the peers don’t pay a dividend. Mercadolibre (NASDAQ:MELI) is the only company with quarter dividends.

Ebay Peer Yield

- P/E Ratio (+)

The current price-to-earnings ratio of EBAY amounts to 5.3. Compared to figures from the peer group, which are valuated with an average ratio of 72.71, Ebay looks cheaper than other companies in the industry.

This impression is also intact when we look at the forward P/E ratios. Ebay’s forward P/E is 16.83.

Ebay Valuation

- Capital Returns (+)

Capital returns are important for investors. Two most used ratios to evaluate the capital efficiency of a company are the return on equity and return on investment.

Ebay ReturnAll return ratios have better values than the peer average.

- Sales and EPS Growth (-)

Sales and earnings growth figures are also very important for investors. Quarter over Quarter, Ebay is losing market share with a sales growth of just 3.7% compared to an peer average value of 29.26%.

Ebay Peer Growth
Ebay receives a "Hold Positive" rating

Ebay passes three of my six key metrics. Similar to my investment rating scheme, EBAY receives a Hold Positive Rating from me.

Rating# Metrics
Strong Buy5 +
Buy4 +
Hold Positive3 +
Hold Negative2 +
Sell1 +

What do you think about ebay? Is it a buy, hold or sell?

This article was written by Dividend Yield. If you enjoyed this article, please subscribe to his feed [RSS].