Last update on 2024-06-05

EBay (EBAY) - Piotroski F-Score Analysis for Year 2023 (Final Score: 7/9)

EBay's Piotroski F-Score in 2023 is 7/9, indicating strong financial health. A detailed analysis on profitability, liquidity, and operational metrics.

Short Analysis - Piotroski Score: 7

We're running EBay (EBAY) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

The Piotroski F-Score of 7 indicates that eBay has a robust financial position. The analysis shows it meets 7 out of 9 criteria positively, which suggests strong profitability, good liquidity, and efficient use of assets. Specifically, eBay has positive net income and cash flow from operations, improved return on assets, reduced leverage, higher current ratio, decreased share dilution, and increased asset turnover. However, operating cash flow is lower than net income, and gross margin has slightly decreased, which suggests some areas need improvement.

Insights for Value Investors Seeking Stable Income

Based on the Piotroski F-Score of 7, eBay appears to be a financially strong and relatively undervalued stock. A score of 7 indicates good investment potential. Therefore, it is worth looking into eBay further if you are considering adding it to your investment portfolio. However, keep an eye on its operating cash flow and gross margin, as these areas require further monitoring and improvement.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Profitability of EBay (EBAY)

Company has a positive net income?

Net income is profit after all expenses. Positive net income reflects EBAY's profitability and operational efficiency.

eBay's net income for 2023 is notably positive at $2.767 billion, contributing 1 point to its Piotroski score. Historically, eBay's net income has greatly varied. For example, it experienced net losses in 2017 (-$1.016 billion) and 2021 (-$1.269 billion). However, in 2020, it reached an impressive peak of $13.608 billion. The current positive net income highlights a favorable trend following 2021's net loss, signaling improved financial health.

Company has a positive cash flow?

Cash Flow from Operations (CFO) reflects the amount of cash a company generates from its regular business operations. It is crucial as it shows the firm's ability to generate sufficient positive cash flow to maintain and grow its operations.

In 2023, eBay's CFO stands at $2.426 billion, indicating a positive cash flow from operations. This suggests that eBay has been successful in generating cash from its core activities. Comparing this with the historical data, the CFO figure has seen fluctuations, peaking at $5.677 billion in 2014, then declining over the years but remaining positive throughout. The lowest point in the last two decades was $0.874 billion in 2003. The positive cash flow in 2023 indicates stability and the ability to support ongoing operations, warranting addition of 1 point in the Piotroski score.

Return on Assets (ROA) are growing?

Return on Assets (ROA) measures a company's profitability relative to its total assets.

In 2023, eBay (EBAY) reported a significant increase in ROA to 0.1303 from -0.0535 in 2022. This positive shift denotes improved efficiency in managing assets to generate profits. Notably, eBay's operating cash flow (OCF) over the past years demonstrated fluctuating trends but showcased resilience, with OCF remaining positive since 2003. Despite the recovery, when juxtaposed against the industry median ROA, which consistently hovered around 0.36-0.80 range, eBay's 2023 figure remains markedly underwhelming, signaling room for further improvement.

Operating Cashflow are higher than Netincome?

Operating cash flow should be higher than net income to indicate strong earnings quality and less manipulation through accounting principles.

In 2023, eBay reported an operating cash flow of $2.426 billion compared to a net income of $2.767 billion. This gives a ratio where operating cash flow is lower than net income, resulting in a score of 0. Looking at the historical data, eBay has shown variable trends. For example, in 2014, the operating cash flow ($5.677 billion) was significantly higher than net income ($46 million). However, in recent years, such as 2021 and 2022, eBay's operating cash flow has remained lower than its net income, indicating that current income may be influenced by non-cash factors. Accrual ratios also suggest variability over the years, standing at 0.1122 in 2023, a slight increase from the previous year's 0.1081. This could hint at accrual-based earnings manipulation to some extent, further explaining why operating cash flow lags behind net income. To sum up, this trend is not favorable for our criterion.

Liquidity of EBay (EBAY)

Leverage is declining?

The criterion examines changes in leverage ratios from one year to another, observed through debt relative to assets.

Comparing EBay's leverage of 0.3904 in 2022 to 0.3404 in 2023, we see a decrease. This is a positive sign as it indicates reduced reliance on debt, enhancing financial stability. Hence, for this criterion, EBay (EBAY) earns 1 point

Current Ratio is growing?

The Current Ratio is a measure of a company's ability to pay off its short-term liabilities with its short-term assets. A higher ratio indicates greater liquidity.

The Current Ratio for eBay (EBAY) has increased from 2.1751 in 2022 to 2.4372 in 2023. This increase results in an additional point according to the Piotroski criterion. A rising Current Ratio suggests that eBay has improved its liquidity position, making it better equipped to meet its short-term obligations. This is a positive trend, particularly when compared with the industry's median current ratio of 1.6449 in 2023, signifying that eBay is in a stronger liquidity position relative to its peers. Over the last 20 years, the trend in eBay's current ratio has shown variability, but the recent increase aligns with a favorable liquidity trajectory.

Number of shares not diluted?

This criterion examines the change in a company’s outstanding shares. A decrease in outstanding shares suggests that the company might be executing share repurchase programs.

From 2022 to 2023, EBAY's outstanding shares decreased from 558 million to 530 million. This reduction is a positive signal, often suggesting the company is buying back shares, thus returning value to shareholders and indicating management’s confidence in the company’s future. Over the last 20 years, the trend shows a continual decrease in the number of outstanding shares, which is generally a positive indicator for the stock price and shareholder value.

Operating of EBay (EBAY)

Cross Margin is growing?

Gross Margin measures the percentage of revenue that exceeds the cost of goods sold, it indicates the efficiency of a company in managing its production costs and is crucial for assessing profitability.

Comparing the Gross Margin of 0.7198 in 2023 to 0.7264 in 2022 for eBay, we see a slight decrease. Thus, this criterion does not add a point in the Piotroski analysis, scoring 0. Historically, eBay's gross margin has faced a downtrend, peaking at 0.8203 in 2005 and varying between 0.6862 and 0.798 in recent years. The reduction from 2022 to 2023 is consistent with this trend, showing decreased production efficiency. Meanwhile, the industry median Gross Margin has been much lower, peaking at 0.8036 in 2003 and then significantly falling. Comparing eBay's values to the industry median further illustrates eBay's competitive operation, despite its gradual decline.

Asset Turnover Ratio is growing?

Change in Asset Turnover: An increase in asset turnover signifies better efficiency in generating revenue from assets.

The asset turnover ratio for eBay has increased from 0.4126 in 2022 to 0.4762 in 2023, resulting in a score of 1 point. Historically, in the past 20 years, the asset turnover has shown variability, reaching a peak of 0.5518 in 2008 and a low of 0.2731 in 2015. The current ratio indicates a significant improvement over the previous year, suggesting that eBay is using its assets more efficiently to generate sales.