eBay Inc (EBAY)

Conclusion

eBay operates online marketplaces that connect buyers and sellers in the United States, the United Kingdom, China, Germany and other markets, and its platforms let users list, sell, buy and pay for products. At 120.97 USD on 2026-11-09, eBay has a market capitalisation of 53.1 billion USD and an enterprise value of 58.2 billion USD.

The verdict is overvalued. The fair value band runs from 52.56 to 78.83 USD with a midpoint of 65.70 USD, giving a margin of safety of -45.7% at the current price. The DCF gives 51.92 USD per share, while the fair value from historical multiples is 79.47 USD. Today's P/E of 25.4 compares with a ten-year median of 12.1, a premium of 110.3%, and EV/EBITDA of 18.3 compares with a median of 12.5. The reverse DCF implies growth of 16.0% a year, against revenue growth of 4.5% a year over five years and free cash flow per share growth of 6.1%.

What supports the case is a return on invested capital of 25.1% against a WACC of 10.4%, a spread the company's own data classes as value-creating, together with an Altman Z-score of 6.59 and free cash flow conversion of 115.6% on a trailing basis. What would break it is the current ratio of 0.78, five-year free cash flow conversion of 50.3%, and an EPS compound decline of 11.0% over five years. If earnings do not catch up with the price, the gap to the fair value band becomes hard to close.

Financial health

Financial strength is yellow: three measures are assessed as good, namely the Altman Z-score of 6.59, net debt to EBITDA of 1.6x and interest coverage of 11.0x, while the current ratio of 0.78 is assessed as weak. The quick ratio is 0.59 and debt to equity is 1.60. The Altman Z-score falls in the safe zone, though the model was designed for manufacturers and eBay is not one. Insolvency risk: low, about 1.4% by the estimate of the Ohlson model over one to two years. The company's short-term liabilities exceed its liquid assets, which is the main balance-sheet weakness, but leverage and debt service look comfortable.

Earnings quality

Earnings quality is yellow: free cash flow conversion over the last twelve months of 115.6% and a five-year share count reduction of 8.5% a year are good, while five-year conversion of 50.3% is weak. Accruals stand at -0.8% of the balance sheet, a sign that reported earnings are backed by cash. Stock-based compensation is 5.4% of revenue, leaving free cash flow after it at 1.74 billion USD. The Piotroski score is 6 out of 9 and the Beneish M-score of -1.88 reads as unlikely to signal manipulation. The company beat estimates in seven of the last eight quarters, with an average surprise of 3.6%. Analysts have raised current-year estimates by 2.4% over 90 days and next-year estimates by 2.6%.

Profitability

Profitability is green: return on invested capital of 25.1% against a WACC of 10.4% gives a spread that the company's data labels as value-creating, and the operating margin of 20.2% and net margin of 16.8% are both assessed as good. Margins sit below their ten-year medians: the gross margin is 72.8% against 75.6%, the operating margin 20.2% against 23.3%, and the net margin 16.8% against 25.7%. Return on invested capital has a five-year median of 24.4%, so current returns are in line with history. Return on equity is 47.3%, but the DuPont split shows that much of it comes from leverage: a net margin of 18.3%, an asset turnover of 0.63 and an equity multiplier of 3.82, all as of 2025-12-31.

Growth

Growth is yellow: revenue growth is neutral and the five-year EPS decline is weak, while revenue grew in seven of ten comparable years and next-year EPS estimates are assessed as good. Revenue compounded at 4.3% over three years, 4.5% over five years and 2.6% over ten years. Earnings per share compounded at -11.0% over five years, though 12.1% over ten years. Free cash flow per share grew at 3.7% over three years, 6.1% over five and 2.7% over ten. Consensus next-year EPS growth is 9.9%. The gap between a five-year EPS decline and a positive ten-year EPS trend means earnings have been volatile, and the current price assumes that growth will accelerate well beyond the historical rate.

Valuation

Valuation is red: the verdict is overvalued, with a margin of safety of -45.7%. Current multiples sit above their ten-year medians: P/E 25.4 against 12.1 (a premium of 110.3%), EV/EBITDA 18.3 against 12.5 (45.6%), price to free cash flow 22.0 against 16.3 (35.4%), price to sales 4.28 against 3.47 (23.5%) and price to book 12.0 against 6.2 (95.2%). The DCF gives 51.92 USD per share using a discount rate of 11.2% and a long-term growth rate of 2.5%; the terminal value accounts for 45.4% of that figure. The reverse DCF implies growth of 16.0% a year against revenue growth of 4.5% and free cash flow per share growth of 6.1% over five years. The fair value band is an order of magnitude built on fixed assumptions, not a price target. The dividend yield is 1.0% and the payout on free cash flow is 22.6%.

Risks

A current ratio of 0.78 means short-term obligations exceed liquid assets, so any tightening in funding or a fall in cash generation would press on liquidity. A five-year free cash flow conversion of 50.3% shows that cash has often lagged reported profit, and that the trailing 115.6% may not persist. The five-year EPS decline of 11.0% shows that the earnings base has not grown, so a price 110.3% above its historical P/E median rests on expected recovery. Revenue growth of 4.5% over five years is well below the 16.0% growth the reverse DCF implies. The analysis has limits: it has no debt maturity schedule and no revenue split by segment, so refinancing risk and the mix of growth cannot be assessed.