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.")

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FB data by YCharts

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

    Adequate Size of Enterprise - market capitalization of at least $2 billion - PASS

    Sufficiently Strong Financial Condition - ratio of current assets over current liabilities  greater than 2 - PASS

    Earnings Stability - positive earnings per share for at least 10 straight years - FAIL

    Dividend Record - has paid a dividend for at least 10 straight years - FAIL

    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

    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.)

    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

      Sufficiently Strong Financial Condition, Part 1 - current ratio greater than 1.5 - PASS

      Sufficiently Strong Financial Condition, Part 2 - Debt to Net Current Assets ratio less than 1.1 - PASS

      Earnings Stability - positive earnings per share for at least five years - PASS

      Dividend Record - currently pays a dividend - FAIL

      Earnings growth - EPSmg greater than five years ago - PASS

      Valuation Summary

      Key Data:

      Recent Price

      $58.02

      MG Value

      $21.30

      MG Opinion

      Overvalued

      Value Based on 3% Growth

      $8.02

      Value Based on 0% Growth

      $4.70

      Market Implied Growth Rate

      48.18%

      NCAV

      $4.59

      PEmg

      104.86

      Current Ratio

      13.56

      PB Ratio

      8.89

      Balance Sheet - 3/31/2014

      Current Assets

      $14,060,000,000

      Current Liabilities

      $1,037,000,000

      Total Debt

      $191,000,000

      Total Assets

      $19,028,000,000

      Intangible Assets

      $1,682,000,000

      Total Liabilities

      $2,291,000,000

      Outstanding Shares

      2,564,000,000

      Earnings Per Share

      2014 (estimate)

      $1.01

      2013

      $0.59

      2012

      $0.01

      2011

      $0.29

      2010

      $0.28

      2009

      $0.10

      2008

      -$0.06

      Earnings Per Share - ModernGraham

      2014 (estimate)

      $0.55

      2013

      $0.30

      2012

      $0.15

      2011

      $0.18

      2010

      $0.11

      2009

      $0.02

      Conclusion:

      Facebook is suitable for the enterprising investor, but not for the defensive investor, because of the company's lack of dividends, short operating history, and high PEmg and price-to-book ratios.

      The company appears overvalued because its earnings growth rate, based on an earnings estimate of 14 cents a share for this year, falls below the market's implied estimate of 48.18% earnings growth.

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      At the time of publication, the author had no position the stock mentioned.

      This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.