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A Look at Facebook’s Valuations

Neha Gupta - Author
By

Nov. 19 2018, Updated 10:30 a.m. ET

Valuation ratio

When it comes to valuation ratios, Facebook’s (FB) price-to-sales ratio for the trailing 12 months (or TTM) stands at 15.08x compared to the industry average of 8.36x and the sector’s average of 2.87x.

Facebook’s price-to-book ratio stands at 7.52x compared to the industry average of 6.15x and the sector’s average of 2.48x. Facebook’s price-to-tangible-book value stands at 10.83x compared to its industry average of 10.01x and sector average of 3.99x. Its TTM price-to-cash-flow stands at 30.85x compared to the industry average of 27.34x and sector average of 15.33x.

In comparison, the price-to-cash-flow ratios of Facebook peers Amazon (AMZN), Alibaba (BABA), Alphabet (GOOGL), and Baidu (BIDU) stand at 35.28x, 28.65x, 19.58x, and 17.72, respectively.

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Management effectiveness

Facebook has a 12-month return on asset ratio of 21.01x in comparison to the industry average and sector average of 11.76 and 10.65, respectively. The five-year average return on assets stands at 11.64x, while it stood 12.24x and 9.65x for the industry and sector.

The trailing 12-month return on investments stands at 21.94x, while the five-year average comes in at 12.21x. Its return on equity for the trailing 12 months stands at 23.25x.

Growth rates

Facebook’s sales from the most recent quarter increased 44.83% from a similar quarter last year. The sales growth rate for the industry stood at 19.71%, while it is 20.1% for the sector. Facebook’s sales have grown by a factor of 49.42 over the past five years. The industry and sector growth rate stood at 20.37% and 5.19%, respectively.

Earnings per share, on the other hand, increased by a factor of 68.83 in the most recent quarter compared to the same quarter a year ago. The five-year earnings per share growth rate stands at 62.06x.

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