Facebook Inc is a financially healthy and robust stock with a proven track record of outperformance. We all know Facebook, and having this large-cap to cushion your portfolio during a volatile period in the stock market isn’t a bad idea. Today I will give a high-level overview of the stock, and why I believe it’s still attractive. View our latest analysis for Facebook
Facebook, Inc. provides various products to connect and share through mobile devices, personal computers, and other surfaces worldwide. Founded in 2004, and led by CEO Mark Zuckerberg, the company now has 25,105 employees and with the company’s market capitalisation at US$537.22B, we can put it in the large-cap group. Bear market volatility can have a short-term impact on large, well-established companies, but in the long-run, these businesses are likely to prevail. This is because fundamentally, nothing has changed. A fall in share price is hardly detrimental to its financial health and business operations. So, large-cap stocks are a safe bet to buy more of when the stock market is selling off.
With zero debt on its balance sheet, Facebook isn’t constrained to debt obligations and covenants, which can be burdensome during financial downturns. Highly-levered companies have to maintain a cash cushion to meet near-term interest payments as well as meet unforeseen circumstances. With no lenders’ needs to tend to, Facebook enjoys financial flexibility and independence – an invaluable position to be in during bear markets. Facebook’s enviable cash position of US$41.71B provides it with more than enough liquidity to meet other near-term liabilities, placing it in a financially robust standpoint in the face of uncertainty.
FB’s profit growth over the previous five years has been positive, with an average annual rate of 53.11%, outpacing the industry growth rate of 17.62%. It has also returned an ROE of 21.43% recently, above the industry return of 10.24%. This consistent market outperformance illustrates a robust track record of delivering strong returns over a number of years, increasing my conviction in Facebook as an investment over the long run.
Next Steps:
Facebook makes for a robust long-term investment based on its scale, financial health and track record. Remember, in bear markets, sell-offs can be unjustified. Ask yourself, has anything really changed with Facebook? If not, then why not scoop it up at a discount? Lining your portfolio with a few well-established companies can reduce your risk and help you scale your wealth in the long run. One thing you should remember though, is to do your homework. Do your own research, come up with your point of view. Below is a list I’ve put together of other things you should consider before you buy:- Future Outlook: What are well-informed industry analysts predicting for FB’s future growth? Take a look at our free research report of analyst consensus for FB’s outlook.
- Valuation: What is FB worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether FB is currently mispriced by the market.
- 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.