Twitter’s Fundamental Analysis for 2017
Deciphering Twitter’s comprehensive valuations
Twitter (TWTR) has an EV (enterprise value) of ~$10.2 billion. Among its peers, PayPal (PYPL), Baidu (BIDU), Square (SQ), and Groupon (GRPN) have enterprise values of ~$68.1 billion, ~$73.9 billion, ~$9.2 billion, and ~$1.9 billion, respectively.
Twitter’s EV-to-adjusted-EBITDA1 multiple for the trailing 12 months is 46.9x. Its EV-to-estimated-EBITDA multiple for 2017 is 13.5x. The company’s EV-to-sales multiple for the trailing 12 months is 4.2x, while its EV-to-sales multiple is expected to be 4.0x in 2017.
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Twitter’s trailing-12-month EV-to-cash flow multiple is 13.1x, and its trailing-12-month EV-to-free-cash-flow multiple is 17.7x.
Where do Twitter’s EBITDA and ratios stand?
Twitter’s EBITDA2 margin for 2016 was 9%, which yielded EBITDA of $217.2 million—up 7% from 2015. For 2017, Wall Street expects the company’s EBITDA to reach $699.3 million.
Twitter’s 2017 EV-to-adjusted EBITDA is expected to be 14.6x. For 2018, its EV-to-adjusted EBITDA is forecast to be 13.5x. Twitter has a price-to-EBITDA multiple of 57.6x.
Inside Twitter’s price and valuation multiples
Twitter’s current book value per share of ~$6.50 compares with its expected book value per share of ~$6.40 for 2017. Twitter stock is trading at a price-to-book value of ~2.6x.
In comparison, Twitter’s peers PayPal, Baidu, Square, and Groupon have current book value per share metrics of ~$12.50, $41.90, ~$1.90, and ~$0.33, respectively.
Twitter’s price-to-sales multiple of ~5.1x is slightly lower than its estimated price-to-sales multiple of ~5.2x.
How much debt is Twitter carrying?
Twitter is carrying total debt of ~$1.8 billion, which is the total of its short-term debt of $80.0 million and long-term debt of ~$1.7 billion. With total capital of ~$6.5 billion, its total-debt-to-total-capital ratio is 27%.
Looking at Twitter’s debt in relation to its assets, equity, and EBITDA, it has a debt-to-asset ratio of 0.25, a debt-to-equity ratio of 36.9, and a debt-to-EBITDA ratio of ~8.0.