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TheStreet Open House

eBay Delivers the Goods and Just Became Better

NEW YORK ( TheStreet) -- If eBay (EBAY - Get Report) were valued near Amazon's (AMZN) 160 or more P/E valuation, eBay shares would trade for over $500.

When you consider eBay earns more profit per share than Amazon, maybe it's eBay shares that should trade above $300. eBay has so many superior metrics compared to Amazon it's hard to know where to begin. Take a look at the two companies' cash-flow history.

EBAY Free Cash Flow TTM Chart EBAY Free Cash Flow TTM data by YCharts

Wall Street is in love with Amazon's revenue growth machine, but between the two eBay is the one that continues to deliver shareholder value, at least on the bottom line. eBay's latest example of controlled expansion is through its PayPal division.

Braintree Payment Solutions agreed to be acquired by PayPal for $800 million. eBay has about $11 billion in cash and equivalents, based on the latest reported balance sheet. Because the deal is expected to close during the fourth quarter, investors shouldn't expect a material change in PayPal's 2013 processing volume. According to eBay's CEO John Donahoe, "Braintree is a perfect fit with PayPal."

Braintree is a six-year-old, fast-growing startup designed to make mobile payments easy, and is exactly what PayPal wants to maintain the lead in online payment processing. Amazon, Google (GOOG) and others are actively trying to duplicate the cash cow PayPal has become.

Braintree reportedly processed over $3 billion in payments in 2011 and, according to research firm Gartner, the mobile payment market is expected to grow to over $235 billion this year, and more than $700 million by 2017.

Besides Braintree's organic growth, the company has grown through mergers. Last year Braintree acquired Venmo for $26.2 million, a mobile app that allows friends to transfer money for free. Venmo gives PayPal another method to bring consumers into its ecosystem and generates profits when users fund transfers through a credit card.

EBAY Gross Profit Margin Quarterly Chart EBAY Gross Profit Margin Quarterly data by YCharts

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