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Facebook

Nasdaq:FB
Snowflake Description

Outstanding track record with flawless balance sheet.

The Snowflake is generated from 30 checks in 5 different areas, read more below.
FB
Nasdaq
$528B
Market Cap
  1. Internet Software and Services
Company description

Facebook, Inc. provides various products to connect and share through mobile devices, personal computers, and other surfaces worldwide. More info.


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3 Month History
FB
Industry
5yr Volatility vs Market

Value

 Is Facebook undervalued based on future cash flows and its price relative to the stock market?

Value is all about what a company is worth versus what price it is available for. If you went into a grocery store and all the bananas were on sale at half price, they could be considered undervalued.
INTRINSIC VALUE BASED ON FUTURE CASH FLOWS
Here we compare the current share price of Facebook to its discounted cash flow analysis.value.

The discounted cash flow value is simply looking at what the company is worth today, based on estimates of how much money it is expected to make in the future.

How is this discounted cash flow calculated?

  • The current share price of Facebook is above its future cash flow value.
Often investors are willing to pay a premium for a company that has a high dividend or the potential for future growth.
PRICE RELATIVE TO MARKET
We can also value a company based on what the stock market is willing to pay for it. This is similar to the price of fruit (e.g. Mangoes or Avocados) increasing when they are out of season, or how much your home is worth.

The amount the stock market is willing to pay for Facebook's earnings, growth and assets is considered below, and whether this is a fair price.
Price based on past earnings
Are Facebook's earnings available for a low price, and how does this compare to other companies in the same industry?
  • Facebook is good value based on earnings compared to the US Internet Software and Services industry average.
  • Facebook is overvalued based on earnings compared to the US market.
Price based on expected Growth
Does Facebook's expected growth come at a high price?
  • Facebook is poor value based on expected growth next year.
Price based on value of assets
What value do investors place on Facebook's assets?
  • Facebook is overvalued based on assets compared to the US Internet Software and Services industry average.
X
Value checks
We assess Facebook's value by looking at:
  1. Is the discounted cash flow value less than 20%, or 40% of the share price? (2 checks) ( Click here or on bar chart for details of DCF calculation. )
  2. Is the PE ratio less than the market average, and/ or less than the Internet Software and Services industry average (and greater than 0)? (2 checks)
  3. Is the PEG ratio within a reasonable range (0 to 1)? (1 check)
  4. Is the PB ratio less than the Internet Software and Services industry average (and greater than 0)? (1 check)
  5. Facebook has a total score of 1/6, see the detailed checks below.

    Note: We use GAAP Earnings per Share in all our calculations including PE and PEG Ratio.
    Note 2: PEG ratio is based on analysts EPS growth expectations in 1 year (20.76%).

    Full details on the Value part of the Simply Wall St company analysis model.
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Discounted cash flow (2 Stage Free Cash Flow to Equity)

The calculations below outline how an intrinsic value for Facebook is arrived at by discounting future cash flows to their present value. We use analyst's estimates of cash flows going forward 5 years.

See our documentation to learn about this calculation.

5 year cash flow forecast

Present value of next 5 years cash flows:
$75,196

Terminal Value

Terminal Value = FCF2021 × (1 + g) ÷ (Discount Rate – g)

Terminal Value = $31,209 × (1 + 2.47%) ÷ (11.76% – 2.47%)

Terminal value based on the Perpetuity Method where growth (g) = 2.47%:
$344,253

Present value of terminal value:
$197,449

Equity Value

Equity Value (Total value) = Present value of next 5 years cash flows + terminal value
$272,645 = $75,196 + $197,449

Value = Total value / Shares Outstanding ($272,645 / 2,906)

Discount to Share Price

Value per share:
$93.83

Current discount (share price of $181.86): -93.82%



Estimate of Discount Rate

The discount rate, or required rate of return, is estimated by calculating the Cost of Equity.

Discount rate = Cost of Equity = Risk Free Rate + (Levered Beta * Equity Risk Premium)

Discount rate = 11.76% = 2.47% + (1.234 * 7.53%)



Estimate of Bottom Up Beta

The Levered Beta is the Unlevered Beta adjusted for financial leverage. It is limited to 0.8 to 2.0 (practical range for a stable firm). Note the market value of equity is used not the book value ($528,450,378,911).

Levered Beta = Unlevered beta (1 + (1- tax rate) (Debt/Equity))

1.234 = 1.234 (1 + (1- 30%) (0%))

Levered Beta used in calculation = 1.234



Assumptions
  1. The risk free rate of 2.47% is from the 10 year government bond rate in USD.
  2. The bottom-up beta is estimated by analysing other companies in the same industry.
  3. The Equity Risk Premium is calculated by subtracting the risk free rate from the market return premium (7.53%) (source: Buffet).
  4. The dividend discount model is automatically used for companies in the following industries: Banks, Insurance, Real Estate Investment Trusts (REITs), Diversified Financial Services and Capital Markets.

Future Performance

 How is Facebook expected to perform in the next 1 to 3 years based on estimates from 39 analysts?

The future performance of a company is measured in the same way as past performance, by looking at estimated growth and how much profit it is expected to make.

Future estimates come from professional analysts. Just like forecasting the weather, they don’t always get it right!
Annual Growth Rate
19.1%
Expected annual growth in earnings.
Earnings growth vs Low Risk Savings
Is Facebook expected to grow at an attractive rate?
  • Facebook's earnings growth is expected to exceed the low risk savings rate of 3.6%.
Growth vs Market Checks
  • Facebook's earnings growth is expected to exceed the US market average.
  • Facebook's revenue growth is expected to exceed the US market average.
Annual Growth Rates Comparison
Analysts growth expectations
Super high growth metrics
High Growth Checks
  • Facebook's earnings are expected to grow by 19.1% yearly, however this is not considered high growth (20% yearly).
  • Facebook's revenue is expected to grow significantly at over 20% yearly.
Past and Future Earnings per Share
The accuracy of the analysts who estimate the future performance data can be gauged below. We look back 3 years and see if they were any good at predicting what actually occurred. We also show the highest and lowest estimates looking forward to see if there is a wide range.
Performance in 3 years
In the same way as past performance we look at the future estimated return (profit) compared to the available funds. We do this looking forward 3 years.
  • Facebook is expected to perform strongly, Return on Equity (ROE) in 3 years is estimated to be above 20%.

Improvement & Relative to industry
  • Performance (ROE) is expected to be above the current US Internet Software and Services industry average.
  • A decline in Facebook's performance (ROE) is expected over the next 3 years.
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Future performance checks
We assess Facebook's future performance by looking at:
  1. Is the annual earnings growth rate expected to beat the low risk savings rate, plus a premium to keep pace with inflation?
  2. Is the annual earnings growth rate expected to beat the average growth rate in earnings of the US market? (1 check)
  3. Is the annual revenue growth rate expected to beat the average growth rate in revenue of the US market? (1 check)
  4. Is the annual earnings growth rate expected to be above 20%? (1 check)
  5. Is the annual revenue growth rate expected to be above 20%? (1 check)
  6. Is the Return on Equity in 3 years expected to be over 20%? (1 check)
Some of the above checks will fail if the company is expected to be loss making in the relevant year.
Facebook has a total score of 5/6, see the detailed checks below.

Note 1: We use GAAP Net Income Excluding Exceptional Items for our Earnings in all our calculations.

Full details on the Future part of the Simply Wall St company analysis model.

Past Performance

  How has Facebook performed over the past 5 years?

The past performance of a company can be measured by how much growth it has experienced and how much profit it makes relative to the funds and assets it has available.
Past earnings growth
Below we compare Facebook's growth in the last year to its industry (Internet Software and Services).
Past Earnings growth analysis
We also check if the company has grown in the past 5 years, and whether it has maintained that growth in the year.
  • Facebook's year on year earnings growth rate has been positive on average over the past 5 years.
  • Facebook's 1 year earnings growth exceeds its 5 year annual average (85.9% vs 51.4%)
  • Facebook's earnings growth has exceeded the US Internet Software and Services industry average in the past year (85.9% vs 18%).
Earnings and Revenue History
Facebook's revenue and profit over the past 5 years is shown below, any years where they have experienced a loss will show up in red.
Performance last year
We want to ensure a company is making the most of what it has available. This is done by comparing the return (profit) to a company's available funds, assets and capital.
  • Strong return on shareholders funds (ROE > 20%) last year.
  • Facebook performed above the US Internet Software and Services industry average based on Return on Assets (ROA) last year.
  • Performance based on Return on Capital Employed (ROCE) has improved over 3 years.
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Past performance checks
We assess Facebook's performance over the past 5 years by checking for:
  1. Has earnings increased in past 5 years? (1 check)
  2. Has the earnings growth in the last year exceeded that of the Internet Software and Services industry? (1 check)
  3. Is the recent earnings growth over the last year higher than the average annual growth over the past 5 years? (1 check)
  4. Is the Return on Equity (ROE) higher than 20%? (1 check)
  5. Is the Return on Assets (ROA) above industry average? (1 check)
  6. Has the Return on Capital Employed (ROCE) increased from 3 years ago? (1 check)
The above checks will fail if the company has reported a loss in the most recent earnings report. Some checks require at least 3 or 5 years worth of data.
Facebook has a total score of 6/6, see the detailed checks below.

Note: We use GAAP Net Income excluding extraordinary items in all our calculations.

Full details on the Past part of the Simply Wall St company analysis model.

Health

 How is Facebook's financial health and their level of debt?

A company's financial position is much like your own financial position, it includes everything you own (assets) and owe (liabilities).

The boxes below represent the relative size of what makes up Facebook's finances.

The net worth of a company is the difference between its assets and liabilities.
Net Worth
  • Facebook is able to meet its short term (1 year) commitments with its holdings of cash and other short term assets.
  • Facebook's cash and other short term assets cover its long term commitments.
Balance sheet
This treemap shows a more detailed breakdown of Facebook's finances. If any of them are yellow this indicates they may be out of proportion and red means they relate to one of the checks below.
Assets
Liabilities and shares
The 'shares' portion represents any funds contributed by the owners (shareholders) and any profits.
  • Low level of unsold assets.
  • Facebook has no debt, it does not need to be covered by total short term assets.
Historical Debt
Nearly all companies have debt. Debt in itself isn’t bad, however if the debt is too high, or the company can’t afford to pay the interest on its debts this may have impacts in the future.

The graphic below shows equity (available funds) and debt, we ideally want to see the red area (debt) decreasing.

If there is any debt we look at the companies capability to repay it, and whether the level has increased over the past 5 years.
  • Facebook has no debt.
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Financial health checks
We assess Facebook's financial health by checking for:
  1. Are short term assets greater than short term liabilities? (1 check)
  2. Are short term assets greater than long term liabilities? (1 check)
  3. Has the debt to equity ratio increased in the past 5 years? (1 check)
  4. Is the debt to equity ratio over 40%? (1 check)
  5. Is the debt covered by short term assets? (1 check)
  6. Are earnings greater than 5x the interest on debt (if company pays interest at all)? (1 check)
  7. Facebook has a total score of 6/6, see the detailed checks below.


Full details on the Health part of the Simply Wall St company analysis model.

Dividends

 What is Facebook's current dividend yield, its reliability and sustainability?

Dividends are regular cash payments to you from the company, similar to a bank paying you interest on a savings account.
Annual Dividend Income
Dividend payments
0%
Current annual income from Facebook dividends.
If you bought $2,000 of Facebook shares you are expected to receive $0 in your first year as a dividend.
Dividend Amount
Here we look how much dividend is being paid, if any. Is it above what you can get in a savings account? It is up there with the best dividend paying companies?
  • Not paying a dividend.
  • Not paying a dividend.
Historical and Future Dividends
It is important to see if the dividend for a company is stable, and not wildly increasing/decreasing each year. This graph shows you the historical rate to count toward your assessment of the stock.

We also check to see if the dividend has increased in the past 10 years.
  • Not paying a notable dividend.
  • Not paying a notable dividend.
Current Payout to shareholders
What portion of Facebook's earnings are paid to the shareholders as a dividend.
  • Not paying a notable dividend.
Future Payout to shareholders
  • Insufficient estimate data to determine if a dividend will be paid in 3 years.
X
Income/ dividend checks
We assess Facebook's dividend by checking for:
  1. Firstly is the company paying a notable dividend (greater than 0.5%) - if not then the rest of the checks are ignored.
  2. Current dividend yield, is there one at all, is it higher than the low risk savings rate, and is it above the top 25% of dividend payers? (2 checks)
  3. Have they paid a dividend for 10 years, and during this period has the dividend been volatile (drop of more than 25%)? (1 check)
  4. If they have paid a dividend for 10 years has it increased in this time? (1 check)
  5. How sustainable is the dividend, can Facebook afford to pay it from its earnings today and in 3 years (Payout ratio less than 90%)? (2 checks)
  6. Facebook has a total score of 0/6, see the detailed checks below.


Full details on the Dividends part of the Simply Wall St company analysis model.

Management

 What is the CEO of Facebook's salary, the management and board of directors tenure and is there insider trading?

Management is one of the most important areas of a company. We look at unreasonable CEO compensation, how long the team and board of directors have been around for and insider trading.
CEO
Mark Zuckerberg, image provided by Google.
Mark Zuckerberg
COMPENSATION $5,765,832
AGE 33
TENURE AS CEO 13.3 years
CEO Bio

Mr. Mark Zuckerberg founded Facebook, Inc. in 2004 and has been its Chief Executive Officer since July 2004 and Chairman since January 2012. Mr. Zuckerberg is responsible for setting the overall direction and product strategy of Facebook. He leads the design of Facebook's service and development of its core technology and infrastructure. Mr. Zuckerberg is also a Co-Founder of Breakthrough Energy Coalition, which he co-founded in November 2015. He has been an Independent Director of Facebook, Inc. since July 2004. He attended Harvard University.

CEO Compensation
  • Mark's compensation has been consistent with company performance over the past year.
  • Mark's compensation appears reasonable.
Management Team Tenure

Average tenure and age of the Facebook management team in years:

5
Average Tenure
45.2
Average Age
  • The average tenure for the Facebook management team is over 5 years, this suggests they are a seasoned and experienced team.
Management Team

Mark Zuckerberg

TITLE
Founder
COMPENSATION
$6M
AGE
33
TENURE
13.3 yrs

Dave Wehner

TITLE
Chief Financial Officer
COMPENSATION
$17M
AGE
48
TENURE
3.4 yrs

Sheryl Sandberg

TITLE
Chief Operating Officer and Director
COMPENSATION
$25M
AGE
47
TENURE
9.7 yrs

Mike Schroepfer

TITLE
Chief Technology Officer
COMPENSATION
$16M
AGE
42
TENURE
4.7 yrs

Chris Cox

TITLE
Chief Product Officer
COMPENSATION
$17M
AGE
34

Susan Taylor

TITLE
Chief Accounting Officer
AGE
48
TENURE
0.6 yrs

Atish Banerjea

TITLE
Chief Information Officer
AGE
51
TENURE
1 yrs

Deborah Crawford

TITLE
Vice President of Investor Relations
TENURE
3.3 yrs

Colin Stretch

TITLE
Vice President and General Counsel
AGE
47
TENURE
4.3 yrs

Elliot Schrage

TITLE
Vice President of Global Communications
AGE
57
Board of Directors Tenure

Average tenure and age of the Facebook board of directors in years:

6.4
Average Tenure
50.6
Average Age
  • The tenure for the Facebook board of directors is about average.
Board of Directors

Sheryl Sandberg

TITLE
Chief Operating Officer and Director
COMPENSATION
$25M
AGE
47
TENURE
5.4 yrs

Reed Hastings

TITLE
Independent Director
COMPENSATION
$346K
AGE
56
TENURE
6.4 yrs

Mark Zuckerberg

TITLE
Founder
COMPENSATION
$6M
AGE
33
TENURE
5.8 yrs

Erskine Bowles

TITLE
Independent Director
COMPENSATION
$416K
AGE
72
TENURE
6.2 yrs

Sue Desmond-Hellmann

TITLE
Lead Independent Director
COMPENSATION
$386K
AGE
60
TENURE
2.4 yrs

Peter Thiel

TITLE
Independent Director
COMPENSATION
$346K
AGE
50
TENURE
12.6 yrs

Marc Andreessen

TITLE
Independent Director
COMPENSATION
$386K
AGE
46
TENURE
9.4 yrs

Jan Koum

TITLE
Independent Director
COMPENSATION
$1
AGE
41
TENURE
3.1 yrs
Recent Insider Trading
  • Facebook insiders have only sold shares in the past 3 months.
Who owns this company?
X
Management checks
We assess Facebook's management by checking for:
  1. Is the CEO's compensation unreasonable compared to market cap and profit (greater than 0.5% of the company's profit + 0.03% of market cap)? (1 check)
  2. Has the CEO's compensation increased more than 20% whilst the EPS is down more then 20%? (1 check)
  3. Is the average tenure of the management team less than 2 years? (1 check)
  4. Is the average tenure of the board of directors team less than 3 years? (1 check)
  5. Facebook has a total score of 0/6, this is not included on the snowflake, see the detailed checks below.


Note: We use the top 6 management executives and board members in our calculations.

Note 2: Insider trading include any internal stakeholders and these transactions .

Full details on the Management part of the Simply Wall St company analysis model.

Company News

Company Info

Map
Description

Facebook, Inc. provides various products to connect and share through mobile devices, personal computers, and other surfaces worldwide. Its solutions include Facebook Website and mobile application that enables people to connect, share, discover, and communicate each other on mobile devices and personal computers; Instagram, a mobile application that enables people to take photos or videos, customize them with filter effects, and share them with friends and followers in a photo feed or send them directly to friends; Messenger, a messaging application to communicate with people and businesses across platforms and devices; and WhatsApp Messenger, a mobile messaging application. The company also offers Oculus virtual reality technology and content platform, which allow people to enter an immersive and interactive environment to play games, consume content, and connect with others. As of December 31, 2016, it had approximately 1.23 billion daily active users. Facebook, Inc. was founded in 2004 and is headquartered in Menlo Park, California.

Details
Name: Facebook, Inc.
Ticker: FB
Exchange: NasdaqGS
Founded: 2004
Market Cap: $528,450,378,911
Shares outstanding: 2,905,808,748
Website: http://www.facebook.com
Address: Facebook, Inc.
1601 Willow Road,
Menlo Park,
California, 94025,
United States
Listings
Exchange Symbol Ticker Symbol Security Exchange Country Currency Listed on
NasdaqGS FB Class A Common Stock Nasdaq Global Select US USD 18. May 2012
DB FB2A Class A Common Stock Deutsche Boerse AG DE EUR 18. May 2012
SWX FB Class A Common Stock SIX Swiss Exchange CH CHF 18. May 2012
SWX FB Class A Common Stock SIX Swiss Exchange CH CHF 18. May 2012
BIT FB Class A Common Stock Borsa Italiana IT EUR 18. May 2012
WBAG FB Class A Common Stock Wiener Boerse AG AT EUR 18. May 2012
SNSE FB Class A Common Stock Santiago Stock Exchange CL USD 18. May 2012
BVC FB Class A Common Stock Bolsa de Valores de Colombia CO COP 18. May 2012
BMV FB * Class A Common Stock Bolsa Mexicana de Valores MX MXN 18. May 2012
BVL FB Class A Common Stock Bolsa de Valores de Lima PE USD 18. May 2012
BOVESPA FBOK34 BDR EA REPR 1/2 COM USD0.000006 CL 'A' Bolsa de Valores de Sao Paulo BR BRL 10. Mar 2014
Number of employees
Current staff
Staff numbers
23,165
Facebook employees.
Industry
Industry: Internet Software and Services
Sector: Software and Services