As of July 23, 2023, Etsy Inc (ETSY, Financial) has seen a 3.94% gain in its stock price, now trading at $96.74 per share. With a market cap of $11.9 billion, the company's GF Value stands at $226.64, indicating a significant undervaluation. Despite a Loss Per Share of $-5.81, Etsy's sales have reached $2.6 billion, and its operating margin is at 14.47%. The company's Return on Invested Capital (ROIC) is at 23.67%, while its Weighted average cost of capital (WACC) stands at 11.99%.
Etsy operates as a leading e-commerce marketplace in the U.S., U.K., Germany, France, Australia, and Canada, focusing on vintage and craft goods. With $13.3 billion in 2022 consolidated gross merchandise volume, Etsy has secured its position as a dominant player in this rapidly growing niche. The company generates revenue from listing fees, commissions on sold items, advertising services, payment processing, and shipping labels. By the end of 2022, Etsy had connected over 95 million buyers and 7.5 million sellers across its marketplace properties: Etsy, Reverb (musical equipment), Elo7 (crafts in Brazil), and Depop (clothing resale).
GF Value of Etsy (ETSY, Financial)
The GF Value is a unique indicator of a stock's intrinsic worth, calculated based on historical trading multiples, an adjustment factor from GuruFocus based on past performance and growth, and estimates of future business performance. The GF Value Line represents the fair value at which the stock should ideally be traded. Given Etsy's current price and market cap, the stock appears to be significantly undervalued. This suggests 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
Before investing in a company, it's crucial to assess its financial strength. Etsy's cash-to-debt ratio stands at 0.44, placing it below 52.42% of companies in the Retail - Cyclical industry. This suggests that Etsy's overall financial strength is relatively poor. However, the company has been profitable for 5 out of the past 10 years and boasts an operating margin of 14.47%, ranking better than 87.34% of companies in the same industry. Etsy's profitability is thus deemed fair.
Growth and ROIC vs WACC
Growth is a critical factor in a company's valuation. Etsy's 3-year average revenue growth rate outperforms 93.94% of companies in the Retail - Cyclical industry. However, its 3-year average EBITDA growth rate is 0%, which is worse than the industry average. Comparing the company's ROIC (23.67%) to its WACC (11.99%), it's clear that Etsy is creating value for its shareholders.
Conclusion
In summary, Etsy (ETSY, Financial) appears to be significantly undervalued. Despite its poor financial condition, its profitability is fair, and its growth ranks better than most companies in the Retail - Cyclical industry. For more detailed insights into Etsy's stock, check out its 30-Year Financials here.
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