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Facebook’s Valuation after 3Q17

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A look at Facebook’s enterprise value and related multiple

Facebook has an EV (enterprise value) of $483.6 billion. Peer companies eBay (EBAY), PayPal (PYPL), Amazon (AMZN), and Baidu (BIDU) have EVs of ~$41.2 billion, ~$88.5 billion, ~$548.4 billion, and ~$78.1 billion, respectively.

Facebook’s EV-to-adjusted-EBITDA (enterprise value to adjusted earnings before interest, tax, depreciation, and amortization) multiple for the trailing 12 months is 23.9x. Its EV-to-estimated-EBITDA multiple is 18.9x, and its EBITDA margin for 2017 is 55%.

Facebook’s EV-to-sales for the trailing 12 months is 13.3x, while its EV-to-sales expected in 2018 is 9.07x.

Its trailing 12-month EV-to-cash flow and trailing 12-month EV-to-free-cash flow are 22.5x and 30.7x, respectively.

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Inside Facebook’s price metrics

With a book value per share of $24.5x, Facebook is trading at a price-to-book value of 7.3x. The estimated book value per share for the stock is $26.04.

The ratio of price-to-sales for Facebook is 14.3x, while the estimated price-to-sales is 12.9x for 2018.

Earnings and sales

The company reported EPS (earnings per share) of $3.60 in 2017, while EPS for 2018 is forecast to be $5.90.

EPS for 2017 came on total sales of $36.5 billion, which rose 48% annually. Sales for 2018 are expected to expand to $53.3 billion.

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EBIT-on-interest coverage ratio

If Facebook had any debt, it would be interesting to see if it could pay the interest. The answer lies in examining the company’s EBIT-on-interest ratio, also called interest coverage ratio, which in this case is 1,242.7x.

EBITDA measures on focus

Facebook’s EBITDA of $20.2 billion for 2017 fell 29% and is expected to decline at the rate of 19% in 2018.

The stock is trading at a price-to-EBITDA ratio of 25.9x. In comparison, peers eBay, PayPal, Amazon, and Baidu are trading at price-to-EBITDA ratios of 12.7x, 36.6x, 40.6x, and 25.3x, respectively.

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