Facebook’s Stock Price is Still Overvalued

overvalued

Facebook Inc. (NASDAQ:$FB) requires no introduction. It is an online social network giant, perhaps unrivaled by competitors within the industry. Facebook’s stock price history over the past year indicates an increase of 36%, but this is overvalued.

Let’s take a look at the company’s latest balance sheets to reveal why:

  • Total cash and cash equivalents of $35.452 billion
  • $0 billion in total debt
  • Total net cash position of $35.452 billion
  • Subtracting the net cash total from its total market cap of $489.967 billion, we have an Enterprise Value of $454.515 billion
  • $15.401 billion in operating earnings
  • Facebook is trading on an acquirer’s multiple of 30, or 30 times operating earnings
  • The average acquirer’s multiple is 7.4

Further, while taking a closer look at Facebook’s latest cash flow statements, it’s indicated that the company generated a two month operating cash flow of $19.384 billion with a %5.079 billion in Capex. This means that Facebook generated a $14.305 billion free cash flow, or a FCF/EV yield of a mere 3%.

There’s no doubt that Facebook is a top competitor in generating revenue with its current amount of $33.173 billion (ttm) and net income of $13.155 billion (ttm). But those impressive numbers should not trump a reasonable evaluation.

Featured Image: twitter

About the author: Jennifer is a University of Western Ontario graduate with a degree in International Business. She strives to excel as a content creator in the digital sphere, working with clients in the Finance and Tech industry to leverage clickable taglines, images, and articles in driving traffic. When not writing, Jennifer enjoys photography, copywriting, and video production.