Is Facebook for Real?
I don't want to get into whether the initial public offering was fair. IPOs are risky and are a two-sided coin.
The underwriters have a job to bring the stock to the market at a high price so the current stockholders and venture capital angels can monetize their investment. The sales group is supposed to introduce the investing public to stocks that have bright futures for the long haul and are fairly valued.
Sometimes one does the job better than the other. Both parties are supposed to be happy, but more often than not one thinks they were sold down the river.
The stock was brought to market in May 2012 at $38 along with first-week trading glitches, and immediately tanked to an eventual low of $17.55 in mid-September. The stock has since had its ups and downs but now trades slightly above its offering price.
The analysts, public and institutions have had ample time to peruse the numbers, so either it should be at its true value or someone is not doing his job correctly.
Let's try to see what numbers should be important to you.
In the past year, the stock seems to have found its legs and has actually outperformed the market as measured by the Value Line Index. While the market is up just 28%, Facebook has recovered and gained 107% for the same period. (Read "delayed dead-cat bounce.")
Fundamental factors: Facebook is now not just a dream but is making a profit.
The stock has a market cap of $96.95 billion and a P/E of 109.59. Revenue is projected to increase by 43.80% this year and another 30.30% next year. Earnings are estimated to grow by 34% this year and additional 33.80% next year and continue to increase annually by 29.59% for at least the next five years. Its financial strength is a solid B+.