Does eBay Inc's (NASDAQ:EBAY) Past Performance Indicate A Weaker Future?

After looking at eBay Inc's (NASDAQ:EBAY) latest earnings announcement (31 December 2017), I found it useful to revisit the company's performance in the past couple of years and assess this against the most recent figures. As a long term investor, I pay close attention to earnings trend, rather than the figures published at one point in time. I also compare against an industry benchmark to check whether eBay's performance has been impacted by industry movements. In this article I briefly touch on my key findings. See our latest analysis for eBay

How Did EBAY's Recent Performance Stack Up Against Its Past?

To account for any quarterly or half-yearly updates, I use the ‘latest twelve-month’ data, which annualizes the most recent half-year data, or in some cases, the latest annual report is already the most recent financial year data. This method enables me to assess many different companies on a similar basis, using the latest information. For eBay, its most recent bottom-line (trailing twelve month) is -US$1.01B, which, against last year’s figure, has turned from positive to negative. Since these values are fairly short-term thinking, I’ve estimated an annualized five-year value for eBay's earnings, which stands at US$2.61B.

We can further analyze eBay's loss by looking at what the industry has been experiencing over the past few years. Each year, for the past five years eBay has seen an annual decline in revenue of -5.93%, on average. This adverse movement is a driver of the company's inability to reach breakeven. Has the entire industry experienced this headwind? Eyeballing growth from a sector-level, the US internet industry has been growing its average earnings by double-digit 15.44% in the prior year, and 18.62% over the last five years. This shows that any uplift the industry is profiting from, eBay has not been able to gain as much as its industry peers.

What does this mean?

Though eBay's past data is helpful, it is only one aspect of my investment thesis. With companies that are currently loss-making, it is always hard to forecast what will occur going forward, and when. The most valuable step is to examine company-specific issues eBay may be facing and whether management guidance has regularly been met in the past. I recommend you continue to research eBay to get a more holistic view of the stock by looking at:

• 1. Future Outlook: What are well-informed industry analysts predicting for EBAY’s future growth? Take a look at our free research report of analyst consensus for EBAY’s outlook.
• 2. Financial Health: Is EBAY’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
• 3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

NB: Figures in this article are calculated using data from the trailing twelve months from 31 December 2017. This may not be consistent with full year annual report figures.

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.