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Facebook 2012 1Q (IPO) financial analysis

Facebook IPO is the top story in wall-street at the moment so we decided to make this companies financial analysis. Revenue shows stable growth with some seasonality drop at Q1, but growth seams to be slowing down 1Q revenue 1,06 bn.$ is +45% higher then previous year. Other story is Net Income before depreciation which has grown only by +11% from 0,28 bn.$ to 0,32 bn.$. Expenses seams to be growing at faster rate then revenue.

Growth is defiantly driven by user number increase which reached 901 m. at Q1 or by +32% from 680 m. at 2011 Q1. Mobile user growth shows even larger increse from 288 m. to 488 m. of increase by +69%. In general companies results are positive.

Companies balance structure is quite good with strong equity base and equity level of 77% Liquidity ratio 4,5 is also good. On the other hand ROE has dropped from 28% at Q4 2010 to 16% at Q1 2012. In general companies balance structure is strong. 

Before/After IPO

Before After Change
Number of shares 1,958 bn. 2,138 bn. +0,180 bn.
Equity 5,3 bn.$ 12,0 bn.$ +6,7 bn.$
Cash 3,9 bn.$ 10,3 bn.$ +6,4 bn.$
Equity level 77% 88% +11%

In Facebook IPO company has issued only 180 m. out of sold 421 m. shares. Other are just sold by present companies owners. Never the less company will increase its equity by 6,7 bn.$ and that will more then double companies equity from 5,3 bn.$ to 12 bn.$. This money will be used for companies further development.

Share value:

Equity / share 10,8 bn.$ 2,138 bn. 5,1 $/sh.
Market value 38,0 $ +33,9 $ 58 years
Year Net income before Depreciation 1,25 bn.$ +0,58 $/sh. 1,5%

Companies share basic value is ~5,1$.  IPO share price is 38$which shows that market is paying ~33,9$ more or more then 58 years of companies currently earned Net income before Depreciation earnings  1,25 bn.$/year or 0,58$/share. Share value way over-evaluated. Share profitability (Share market price/Net income before Depreciation) is just 1,5% which is a very very low level.

In general our used calculation ratios shows that companies share IPO price 38$ is way over its reasonable price. As all fashion “must have” this is defiantly the case, even if money attracted by IPO will increase companies revenue and earnings by 2-3 times share price would still be way over reasonable price. Of course company has the potential to become something like Apple or Google but this is just expectations.

Analysis source: Facebook IPO registration statement

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