As of July 21, 2023, Etsy Inc (ETSY, Financial) is experiencing a gain of 3.94%, with its stock priced at $96.74. The company's market cap stands at $11.9 billion, with sales recorded at $2.6 billion. According to the GF Value, a unique metric that assesses a stock's intrinsic worth, Etsy (ETSY) is significantly undervalued with a GF Value of $226.92.
Etsy Inc (ETSY, Financial) operates as a leading e-commerce marketplace in the U.S. and the U.K., with substantial operations in Germany, France, Australia, and Canada. Dominating an intriguing niche, Etsy connects buyers and sellers in its online market to trade vintage and craft goods. As of 2022, it connected more than 95 million buyers and 7.5 million sellers on its marketplace properties: Etsy, Reverb (musical equipment), Elo7 (crafts in Brazil), and Depop (clothing resale).
GF Value: Etsy's Significant Undervaluation
The GF Value of Etsy (ETSY, Financial) indicates that the stock is significantly undervalued. This valuation is based on historical trading multiples, an adjustment factor from GuruFocus considering past performance and growth, and future business performance estimates. The current price of Etsy's stock at $96.74 per share, significantly below the GF Value, suggests higher future returns due to its undervaluation.
Given Etsy's significant undervaluation, the long-term return of its stock is likely to far exceed its business growth.
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Financial Strength: A Crucial Consideration
Investing in companies with poor financial strength carries a higher risk of permanent loss. Evaluating a company's cash-to-debt ratio and interest coverage provides valuable insight into its financial strength. Etsy's cash-to-debt ratio of 0.44 is worse than 52.42% of companies in the Retail - Cyclical industry. This indicates that Etsy's financial strength is relatively poor, with a score of 4 out of 10.
Profitability: A Key Investment Indicator
Investing in profitable companies, particularly those demonstrating consistent profitability over the long term, poses less risk. Etsy has been profitable for 5 out of the past 10 years. Over the past twelve months, the company recorded a revenue of $2.6 billion and a loss per share of $-5.81. Its operating margin is 14.47%, ranking better than 87.34% of companies in the Retail - Cyclical industry. Overall, GuruFocus ranks Etsy's profitability as fair, with a score of 7 out of 10.
Growth: A Crucial Factor in Valuation
Growth is a significant factor in the valuation of a company. Etsy's 3-year average annual revenue growth rate is 46%, ranking better than 93.94% of companies in the Retail - Cyclical industry. However, the 3-year average EBITDA growth rate is 0%, ranking worse than all companies in the industry.
ROIC vs WACC: A Profitability Evaluation
Comparing a company's return on invested capital (ROIC) to its weighted cost of capital (WACC) is another way to evaluate profitability. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, Etsy’s ROIC was 23.67, while its WACC came in at 11.93.
Conclusion
In conclusion, Etsy Inc (ETSY, Financial) stock shows every sign of being significantly undervalued. While the company's financial condition is poor, its profitability is fair. Its growth ranks worse than all companies in the Retail - Cyclical industry. To learn more about Etsy stock, you can check out its 30-Year Financials here.
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