Strong Cash Yield: Is Etsy Stock A Buy?

Etsy (ETSY) could be a good pick for your portfolio, with its high cash yield, good fundamentals, and discounted valuation. Companies like this can use cash to fuel additional revenue growth, or simply pay their shareholders through dividends or buybacks. Either move makes them attractive to the market

What Is Happening With ETSY

ETSY is up 1.8% so far this year but is actually trading at P/S (Price-to-Sales) ratio that is at a meaningful discount to its 3-month and 2-year highs, and also belowits 3-year average.

Here is what’s going well for the company. Etsy’s Q3 2025 consolidated Gross Merchandise Sales (GMS) increased 0.9% year-over-year, excluding Reverb, bolstered by a 39.4% surge in Depop GMS. Although the core Etsy marketplace GMS saw a slight decline, new initiatives like enhanced AI-powered personalization and increasing app engagement are key priorities. The recent OpenAI partnership for Instant Checkout within ChatGPT and new AI tools for sellers are set to boost buyer-seller interactions. Q4 guidance projects further GMS improvement.

ETSY Has Good Fundamentals

• Good Cash Yield: Not many stocks offer free cash flow yield of 9.6%, but Etsy stock does
• Strong Margin: Last 12 month operating margin of 13.8%
• Growth: Last 12 revenue growth of 2.0% – low growth, but this selection is all about high yield and margin
• Valuation: ETSY stock currently trading at 38% below 2Y high, 16% below 1M high, and at a PS lower than 3Y average.

Below is a quick comparison of ETSY fundamentals with S&P medians.

*LTM: Last Twelve Months

But What Is The Risk Involved?

While ETSY stock may be a compelling investment opportunity, it’s always helpful to be aware of a stock’s history of drawdown. Etsy fell about 44% in the 2018 correction, nearly 49% during the Covid crash, and a steep 80% in the inflation shock. Even with strong business models and growth, the stock hasn’t been immune when markets turn sour. Good fundamentals help, but big sell-offs still hit hard. But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read ETSY Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

For more details and our view, see Buy or Sell ETSY Stock.

Stocks Like ETSY

Not ready to act on ETSY? Consider these alternatives:

1. Salesforce (CRM)
2. H&R Block (HRB)
3. Stride (LRN)

We chose these stocks using the following criteria:

1. Greater than $2 Bil in market cap
2. Dipped last month & meaningfully below 2Y high
3. Current P/S < last few year average
4. Strong operating margin with no instances of large margin collapse
5. High free cash flow yield

A portfolio of stocks with the criteria above would have performed has follows since 12/31/2016:

• Average 6-month and 12-month forward returns of 10.4% and 20.4% respectively
• Win rate (percentage of picks returning positive) of about 74% for 12-month period
• Strategy consistent across market cycles

A Multi Asset Portfolio Gives You Safer Smarter Growth

Individual picks are volatile but diversified assets offset each other. A multi asset portfolio helps you stay the course capture upside and reduce downside.

The asset allocation framework of Trefis’ Boston-based, wealth management partner yielded positive returns during the 2008-09 period when the S&P lost more than 40%. Our partner’ strategy now includes Trefis High Quality Portfolio, which has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices