Which Stocks Are More Attractive Than eBay’s Stock?
We believe that there are other stocks that are currently better valued than eBay’s stock (NASDAQ: EBAY). EBAY’s current price-to-operating income ratio (P/EBIT) of 16.7x is higher than levels of 13.3x for PerkinElmer (NYSE: PKI), 10.7x for AGCO (NYSE: AGCO), 6.27x for Dish Network (NASDAQ: DISH), 5.45x for Lennar (NYSE: LEN) and 5.45x for Bio-Rad Laboratories (NYSE: BIO). These stocks have a lower valuation (P/EBIT) compared to eBay, while most of them have seen better revenue and operating income growth. This disconnect between valuation and performance could mean that you are better off buying PKI, AGCO, DISH, LEN and BIO vs. EBAY stock. More specifically, we arrive at our conclusion by looking at historical trends in revenues, operating income, and P/EBIT for these companies. Our dashboard – Better Bet Than EBAY Stock: Pay Less To Get More From Stocks PKI, AGCO, DISH, LEN, BIO – has more details – parts of which are summarized below.
1. Revenue Growth
eBay’s revenue grew at an average rate of 2% over the last three years, as compared to average revenue growth of 3.2% for Dish Network, 3.5% for AGCO, 5.7% for Bio-Rad Laboratories, 19% for PerkinElmer, and 24% for Lennar. If we look at the revenue growth over the last twelve month period, eBay’s revenue growth of 27% compares favorably with a 13% growth of Lennar, 22% growth of AGCO and similar to 26% of Bio-Rad Laboratories, but it is lower compared to average growth of 41% for Dish Network, and 54% for PerkinElmer.
2. Operating Income Growth
The three-year average operating income growth for eBay stands at 24% which is similar to 25% of AGCO and 26% of Dish Network but lower than 42% of Lennar, 68% of PerkinElmer, and 263% of Bio-Rad Laboratories. If we look at operating margin growth for the last twelve months eBay’s operating margin growth of 32% is lower than 90% for Lennar, 107% for Bio-Rad Laboratories, 109% for Dish Network, 275% for AGCO, and 297% for PerkinElmer.
The Net of It All
As we can see over the last three years, PerkinElmer, AGCO, Dish Network, Lennar, and Bio-Rad Laboratories have higher revenue growth and operating income growth compared to eBay. Despite better profit and revenue growth in the last three years, these companies have a comparatively lower P/EBIT. Even if we were to look at the last twelve months’ operating income growth a year ago, PerkinElmer, AGCO, Dish Network, Lennar, and Bio-Rad Laboratories fare better compared to eBay, and even then eBay was trading at a higher multiple.
eBay’s persistent underperformance in revenue and operating income growth compared to the other five companies reinforces our conclusion that the stock is expensive compared to them, and we think this gap in valuation will eventually narrow over time to favor the group of more attractively priced names. As such, we believe that PerkinElmer, AGCO, Dish Network, Lennar, and Bio-Rad Laboratories are currently better buying opportunities compared to eBay.
Also eBay Peer Comparisons summarizes how the company fares against peers on metrics that matter.
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