On July 22, 2023, Etsy Inc (ETSY, Financial) reported a daily gain of 3.94%, with its shares trading at $96.74. Despite a Loss Per Share of $-5.81, Etsy's market cap stands at a robust $11.9 billion, with sales reaching $2.6 billion. Intriguingly, the GuruFocus Value (GF Value) for Etsy is calculated at $226.92, suggesting it's significantly undervalued.
Etsy operates as a leading e-commerce marketplace in the U.S., U.K., Germany, France, Australia, and Canada. It connects buyers and sellers to trade vintage and craft goods. With a consolidated gross merchandise volume of $13.3 billion in 2022, Etsy has established itself as a major player in a rapidly expanding niche. By the end of 2022, Etsy had connected over 95 million buyers and 7.5 million sellers across its marketplaces: Etsy, Reverb (musical equipment), Elo7 (crafts in Brazil), and Depop (clothing resale).
GF Value of Etsy (ETSY, Financial)
The GF Value is a unique measure of a stock's intrinsic worth, calculated based on historical trading multiples, an adjustment factor from GuruFocus based on past performance and growth, and future business performance estimates. Etsy's GF Value suggests that its stock is significantly undervalued. This could mean that the long-term return of Etsy's stock is likely to be much higher than its business growth.
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Financial Strength and Profitability of Etsy (ETSY, Financial)
Before investing, it's crucial to assess a company's financial strength. Etsy's cash-to-debt ratio of 0.44 is lower than 52.42% of companies in the Retail - Cyclical industry, indicating that its financial strength is relatively poor. However, Etsy's operating margin of 14.47% ranks better than 87.34% of companies in the same industry, suggesting fair profitability.
Growth Potential of Etsy (ETSY, Financial)
Growth is a critical factor in company valuation. Etsy’s 3-year average revenue growth rate is better than 93.94% of companies in the Retail - Cyclical industry. However, its 3-year average EBITDA growth rate is 0%, which ranks worse than 0% of companies in the same industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted cost of capital (WACC) is another way to assess profitability. Over the past 12 months, Etsy’s ROIC was 23.67, while its WACC came in at 11.99, indicating that the company is creating value for shareholders.
Conclusion
In conclusion, Etsy (ETSY, Financial) appears to be significantly undervalued. Despite its poor financial condition, its profitability is fair, and its growth ranks better than many companies in the Retail - Cyclical industry. For more insights into Etsy's stock, check out its 30-Year Financials here.
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