Is Facebook an Outperform?

February 18, 2013

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E = Equity to Debt Ratio Is Strong

The debt-to-equity ratio and balance sheet for Facebook are strong… for now.

	Debt-To-Equity	Cash	Long-Term Debt
FB	0.23	$9.63 Billion	$2.36 Billion
GOOG	0.10	$48.09 Billion	$.21 Billion

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T = Technicals on the Stock Chart Are Mixed

Facebook has been all over the map since its IPO. This is hardly comforting for investors. On the other hand, traders with good timing have enjoyed this rollercoaster ride immensely. Year-to-date, Facebook has underperformed Google (NASDAQ:GOOG) and the S&P 500.

	1 Month	Year-To-Date	1 Year	3 Year
FB	-4.25%	6.39%	N/A	N/A
GOOG	12.54%	12.09%	31.13%	45.96%
S&P 500	2.83%	6.86%	14.19%	47.31%

At $28.32, Facebook is trading below its 50-day SMA, and above its 100-day and 200-day SMA.

50-Day SMA	28.76
100-Day SMA	25.33
200-Day SMA	23.87

E = Earnings Have Been Unimpressive

This story really boils down to earnings. If Facebook could show consistent EPS growth, then all doubters would be proven wrong, but at this point in time, that seems to be highly unlikely. Of course, top-line growth has been superb.

	2008	2009	2010	2011	2012
Revenue ($)in billions	272.00M	777.00M	1.97	3.71	5.09
Diluted EPS ($)	-0.06	0.10	0.28	0.46	0.01

When we look at the last quarter on a year-over-year basis, we see an increase in revenue, but a decline in earnings. This should come as no surprise.

	12/2011	3/2012	6/2012	9/2012	12/2012
Revenue ($)in billions	1.13	1.06	1.18	1.26	1.59
Diluted EPS ($)	0.14	0.09	-0.08	-0.02	0.02

Let’s take a look at the next page for the Trends and Conclusion. Is this stock an OUTPERFORM, a WAIT AND SEE, or a STAY AWAY?

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