BOSTON (TheStreet Ratings) -- eBay (EBAY) - Get eBay Inc. Report, scheduled to report quarterly earnings after the market close on Wednesday, will give an investors a better look into the turnaround within its marketplace segment.
Analysts are expecting eBay to report a profit of 46 cents a share, compared with 31 cents in the year-ago quarter. Revenue is estimated to improve to $2.6 billion from $2.2 billion a year ago, according to a poll of analysts by Thomson Reuters. Continued growth at the company's PayPal unit and improvements at eBay's marketplace business should lead to a solid quarter.
The following is taken from a first-quarter report published by
, an independent-research unit of
that uses a quantitative model to evaluate stocks.
eBay's revenue growth trails the industry average of 26.3%. Since the same quarter one year prior, revenues rose by 15.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
We rate eBay a "buy." This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. Our model has a $40 price target on shares of eBay, offering the potential for nearly 17% upside from current levels.
The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels, solid stock price performance and good cash flow from operations. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.
Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 63% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, eBay should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
>>For upcoming earnings and estimates, see our
eBay is extremely liquid. Currently, the Quick Ratio is 2.09 which clearly shows the ability to cover any short-term cash needs. The company's liquidity has decreased from the same period last year.
From a valuation perspective, eBay's current price-to-earnings ratio indicates a significant discount compared to an average of 40.75 for the Internet Software & Services industry and a premium compared to the S&P 500 average of 16.06. Conducting a second comparison, its price-to-book ratio of 2.66 indicates a premium versus the S&P 500 average of 2.16 and a significant discount versus the industry average of 8.14. Furthermore, the price-to-sales ratio is well above the S&P 500 average, but well below the industry average.
Equity research manager Chris Stuart, CFA, joined TheStreet Ratings after working as a senior investment analyst with Merrill Lynch covering small-cap equity and alternative investment strategies. Prior to that, Stuart worked for One Beacon Insurance as an actuarial analyst and at H&R Block as a financial adviser. Stuart earned his bachelor's degree in finance from the University of Massachusetts, Amherst. He holds a Chartered Financial Analyst (CFA) designation and is a member of the Boston Security Analysts Society (BSAS) and the CFA Institute.