A Closer Look at PayPal’s Profitability Ratio


Dec. 18 2018, Updated 9:00 a.m. ET

Profitability ratio

PayPal’s (PYPL) trailing-12-month gross margin is 48.67% compared to the industry and sector averages of 40.63% and 43.56%, respectively. PayPal’s five-year gross margin is 49.69%.

PayPal’s trailing-12-month operating margin is 16.29%, whereas the industry and sector averages are 23.57% and 22.41%, respectively. Peers Square (SQ), Yelp (YELP), Baidu (Baidu), and eBay (EBAY) have trailing-12-month operating margins of -1.56%, 20.11%, 19.46%, and 24.07%, respectively.

PayPal’s trailing-12-month net profit margin is 15.72% compared to the industry and sector averages of 25% and 17.48%, respectively.

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PayPal’s trailing-12-month EBITDA margin is 24.38%, while its five-year average is 22.62% compared to the industry average of 31.09%. Its pretax margin for the trailing 12 months is 17.06% compared to the industry average of 31.74%. Its five-year average margin is 15.71% compared to the industry average of 25.86%.

PayPal’s trailing-12-month effective tax rate is 7.87% compared to the industry average of 23.56%. Its five-year average, on the other hand, is 22%.

Growth rates

In its most recent quarter, PayPal’s sales rose 13.71% YoY (year-over-year), while the industry’s rose 10.78% YoY, and the sector’s rose 7.68% YoY. PayPal’s sales have grown 18.26% over the past five years, and the industry’s and sector’s have risen 20.62% and 5.49%, respectively. PayPal’s EPS rose 29.11% YoY, and its five-year EPS growth rate is 20.46%.

Valuation ratios

PayPal’s trailing-12-month price-to-sales ratio is 6.45x, while the industry average is 5.62x and the sector average is 123.63x. Peers Square, Yelp, Baidu, and eBay have trailing-12-month price-to-sales ratios of 9.14x, 2.84x, 4.49x, and 4.54x, respectively.

PayPal’s price-to-book ratio for the most recent quarter is 6.39x, and the industry and sector averages are 5.06x and 1.74x, respectively. The company’s price-to-tangible book value is 11.53x, while the industry and sector averages are 8.71x and 2.58x, respectively. Its trailing-12-month price-to-cash flow ratio is 30.83x. The industry and sector averages are 19.76x and 12.46x, respectively.


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