What’s Twitter’s economic value?
Twitter boasts a total economic or enterprise value (or EV) of $21.8 billion. In comparison, eBay (EBAY), PayPal (PYPL), Yelp (YELP) and Yandex (YNDX), Twitter’s peer companies in the Internet sector, have enterprise values (or EV) of $42.6 billion, $90.7 billion, $2.9 billion, and $10.4 billion, respectively.
How does Twitter’s EV compare with its adjusted EBITDA (adjusted earnings before interest, tax, depreciation, and amortization) for the last 12 months? The company has EV-to-adjusted-trailing-12-month EBITDA of 39.9x. EV-to-EBITDA for the current year is projected to be 19.5x. Twitter’s EBITDA margin for 2017 is 21%.
Twitter’s EV ratios reveal EV-to-sales for the trailing 12 months of 8.5x. The EV-to-projected sales ratio for the next year is 6.7x. The company’s trailing-12-month EV-to-cash-flow was 25.1x, and its trailing-12-month EV-to-free cash flow was 33.2x.
Inside Twitter’s price and valuation multiples
Twitter’s 2017 book value per share of $6.97 compares with expected book value per share of $7.44 for 2018. Twitter stock is trading at a price-to-book value of 4.7x. The company’s 2017 price-to-sales of 9.6x also compares with estimated 2018 price-to-sales of 8.5x.
Twitter was the third-largest Internet player in terms of market capitalization globally at ~$24.6 billion. In comparison, eBay is at ~$38.1 billion, PayPal is at ~$95.9 billion, Yelp is at ~$3.9 billion, and Yandex is at ~$11.1 billion.
EBITDA measures in focus
Twitter’s EBITDA of $547.0 million for 2017 declined 23% and is expected to fall at a rate of 13% in 2018. The stock is trading at a price-to-EBITDA ratio of 44.9x.
Understanding Twitter’s earnings and sales
The EPS (earnings per share) of $0.33 that Twitter posted last stemmed from total revenue of $2.6 billion. Revenue was up 3%. For 2018, revenue is expected to be $3.3 billion and EPS is expected to come in at $0.75.