This is the last and final part of a 3 part series. This is to sum up the information so far and to conclude if Facebook
This will enable you to read and understand the underlying investment that you are buying and whether it is profitable or not. We shall be going through Facebook's balance sheet for the purpose of this article. This is a copy of Facebook's annual 2016 financial statement. This is a copy of Facebook's annual 2016 financial statement. https://s21.q4cdn.com/399680738/files/doc_financials/annual_reports/FB_AR_2016_FINAL.pdf
Going Through apples financial statements, we can clearly see that the company is a very expensive option.
it has a expensive current price compared to it's book value. Therefore the company is too expensive. Fail criteria ✘
The company currently has a ever increasing revenue stream and has been increased every year since 2012 according to it's financial statement. Meets Criteria ✔
Cash flow Yield, the company has a very low cash flow yield in comparison to its overall market cap. A better figure to see would be 8%+. Therefore Fails Criteria. ✘
Price to cash flow, Cash flow price stands at $5.01. However, it's current price as of 30th December 2016 stood at $115.05. This is essentially 20x the available cash at Facebook. Therefore Facebook is considered an expensive investment. Fail Criteria ✘
Assets, Facebook has a sufficient amount of assets to cover any short term expenses and obligations had by the company. Facebook has a current ratio of 11.96x meaning it has sufficient buffer against short term headwinds but it may also mean Facebook is not using the available cash in a efficient manner to generate cash flow from. Meets Criteria ✔
Net worth, Facebook has a positive net worth. The company's net-worth essentially adds up to 59,194 million in positive equity. Meets Criteria ✔
Facebook according to its very own financial statements is expensive by all accounts. For a value investor, to consider investing in such a company, would be considered a risky venture. For a value investor, facebook would have to come down in price, to become closer to it's underlying valuation or grow it's earnings into it's present figure. Which according to its cash flow yeild would take 25 years at 4%.
If you have a particular company you would like me to run through i'd be more than happy to do so.
If you have not yet seen part 1 than here it is for you. https://steemit.com/investing/@ldl/how-to-read-a-balance-sheet-ticker-aapl-apple-part-1
if you missed number 2, then here it is. https://steemit.com/investing/@ldl/how-to-read-a-balance-sheet-ticker-aapl-apple-part-2
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