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What’s Etsy’s Valuation?

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Forward PE

Comparing forward PE (stock price divided by analysts’ earnings estimates for the next four quarters) valuation multiples for companies in the same sector helps investors make sound investment decisions. On April 18, 2018, Etsy (ETSY) was trading at a 12-month forward PE (price-to-earnings) ratio of 69.7x. Following its 4Q17 results, its valuation multiple has increased 5.6%.

The company is trading at a higher valuation multiple than its larger peers. eBay (EBAY) and Alibaba (BABA) were trading at 12-month forward PE ratios of 16.9x and 27.5x, respectively, on April 18.

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Analysts’ growth estimates

Analysts expect Etsy’s 2018 revenue to be $539.9 million, up 22.4% driven by the strategic initiatives. However, its adjusted earnings per share (or EPS) are expected to be $0.40 compared to EPS of $0.48 in fiscal 2017.

Ongoing investments and rising costs from migrating data to the cloud are concerns for Etsy. However, tax reform could provide some cushioning.

Peer comparison

In comparison, analysts expect Alibaba’s (BABA) fiscal 2018 sales to rise 56.0% to $246.9 billion, and its adjusted earnings per share are projected to be $33.05, up 41%. For fiscal 2019, sales are expected to be between 40.0% to $345.6 billion, and its adjusted earnings per share are projected to be $41.63, down 26%. Alibaba is a retail behemoth in China, and the company is gaining from its new user acquisition strategy, fast-growing Tmall platform, and focus on innovations.

Analysts estimate eBay’s (EBAY) revenue in fiscal 2018 to be up 15% to ~$11 billion, while its adjusted EPS is expected to rise 14.5% to $2.29. eBay continues to benefit from fast growing StubHub, Marketplace, and Classified platforms. The bottom-line is expected to be driven by higher revenue and share buybacks.

In the final article in this series, we’ll see what analysts have to say about Etsy.

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