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Would Benjamin Graham Invest in Facebook?

NEW YORK (TheStreet) -- Famed value investor Benjamin Graham taught that investors must conduct a thorough fundamental analysis of securities to determine their intrinsic value and risk. Here's the beginning of such an analysis on Facebook (FB - Get Report). (MG refers to "modern Graham.")

FB Chart

FB data by YCharts

Defensive Investor - must pass at least six of the following seven tests: Score = 2/7

  1. Adequate Size of Enterprise - market capitalization of at least $2 billion - PASS
  2. Sufficiently Strong Financial Condition - ratio of current assets over current liabilities  greater than 2 - PASS
  3. Earnings Stability - positive earnings per share for at least 10 straight years - FAIL
  4. Dividend Record - has paid a dividend for at least 10 straight years - FAIL
  5. Earnings Growth - earnings per share has increased by at least 1/3 over the last 10 years using three-year averages at beginning and end of period - FAIL
  6. Moderate PEmg ratio - PEmg is less than 20 - FAIL (PEmg is a price-to-earnings ratio that uses a weighted average of earnings per share from the last five years.)
  7. Moderate Price to Assets - price-to-book ratio is less than 2.5 or PB x PEmg is less than 50 - FAIL

Enterprising Investor - must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 4/5

  1. Sufficiently Strong Financial Condition, Part 1 - current ratio greater than 1.5 - PASS
  2. Sufficiently Strong Financial Condition, Part 2 - Debt to Net Current Assets ratio less than 1.1 - PASS
  3. Earnings Stability - positive earnings per share for at least five years - PASS
  4. Dividend Record - currently pays a dividend - FAIL
  5. Earnings growth - EPSmg greater than five years ago - PASS

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SYM TRADE IT LAST %CHG
FB $94.41 0.29%
AAPL $114.65 -3.20%
GOOG $630.36 -0.13%
TSLA $264.48 1.70%
YHOO $37.01 0.87%

Markets

Chart of I:DJI
DOW 17,582.13 -16.07 -0.09%
S&P 500 2,099.06 +1.02 0.05%
NASDAQ 5,115.3750 -0.0070 -0.00%

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