Ziggma has one of the best stock screeners for retail investors. Here, you can filter stocks based on several metrics including valuation, growth, and profitability. It also provides users with a multi-asset screener allowing you to evaluate other financial instruments including exchange-traded funds and soon mutual funds.
Further, the Ziggma stock screener has pre-defined lists where it ranks the best companies in terms of sector, market cap, and even dividends. Be sure to also check out our Ziggma’s Portfolio Visualizer, our best-in-class portfolio analysis tool.
One such high-ranked ticker on the Ziggma’s free stock screener is e-commerce company Etsy which has a score of 96. Let’s try to analyze the reasons behind the same.
Etsy stock has crushed the broader markets since its IPO
Etsy is an online platform valued at a market cap of $21.7 billion. It operates as a two-sided online marketplace connecting buyers and sellers in the U.S., the U.K., India, France, Australia, Canada, and Germany. Etsy’s online platforms include Etsy.com and Reverb.com. The company offers 85 million items across retail categories to buyers providing multiple seller services such as Etsy Payments, Etsy Ads, and Etsy Shopping Labels.
Additionally, it also offers several seller tolls that include a shop manager dashboard, a centralized hub to track orders as well as managing inventory and view various metrics and stats.
Etsy stock went public in April 2015 and returned 470% since its IPO. Comparatively, the S&P 500 is up 179% while the Technology Select Sector SPDR ETF or XLK has returned 275% in this period. E-commerce peers Amazon and eBay have gained 803% and 178% since Esty went public. Despite Etsy’s rapid climb, the stock is down 30% from record highs providing investors an opportunity to buy the dip.
Recent quarterly results
In the first quarter of 2021, Etsy sales were up 142% year over year at $551 million. This allowed the company to increase net income by a staggering 1,048% to $144 million indicating it enjoys high operating leverage as the increase in the cost of sales and operating expenses were well below top-line growth.
In 2020, Etsy’s sales more than doubled to $1.73 billion while net income was up 264% at $2.69 per share. However, Etsy’s management warned investors that as the U.S. economy emerges from the ashes of the ongoing pandemic revenue growth might decelerate in the upcoming quarters. Etsy in fact forecasts Q2 sales to increase between 15% and 25% year over year.
Meanwhile, in the March quarter, Etsy’s free cash flow improved multifold by 410% to $148 million. The company ended Q1 with $1.7 billion in liquidity while its debt balance stood at a reasonable $1.3 billion.
Valuation and more
Wall Street expects Etsy sales to rise by 32.4% to $2.28 billion in 2021 and by 21.2% to $2.77 billion in 2022. Its adjusted earnings are forecast to rise at an annual rate of 53% in the next five years. It means Etsy stock is trading at a forward price to sales multiple of 9.5x and a price to earnings ratio of 55.5x given its adjusted earnings might touch $3.08 per share in 2021.
Etsy stock is trading at a premium valuation but the company continues to grow its revenue and profit margins at a stellar pace. Analysts tracking the stock have a 12-month average price target of $223 which is 30% above Etsy’s current trading price.
According to Ziggma, the industry in which Esty operates shows a projected growth rate of over 21.5% which means the company should continue to expand top-line and earnings going forward.
Etsy’s return on equity of 88.1% reflects its high level of profitability which is one of the highest in the industry. Ziggma explains Etsy outperforms 96% of its peers in the Specialty Retail industry based on its selection of 30 key financial performance indicators.
In a nutshell, Ziggma has scored Etsy highly in terms of growth (98), profitability (91), but low on valuation (16).
What next for investors?
In 2019, Etsy’s sales and adjusted EBITDA rose by 36% and 34% respectively. We can see its top-line growth accelerated amid the pandemic driven by the shift towards online shopping. While sales were up 111% in 2020, adjusted EBITDA almost tripled year over year.
The company also benefited from other offerings such as offline ads, personalized recommendations as well as integrated videos that helped boost engagement rates. It ended the March quarter with 90.7 million active buyers, a growth of 90% while active sellers rose 67% to 4.7 million. Etsy’s gross merchandise volume also climbed 132% to $3.14 billion in Q1.
Earlier this month, Etsy disclosed it would acquire Depop which is a fashion resale marketplace, for $1.6 billion. The acquisition is expected to boost revenue but weigh heavily on earnings as it closes in Q3 of 2021. Etsy remains a top growth stock that is firing on all cylinders and should be on the watchlist of investors right now. In order to take a look at Ziggma’s top-ranking stocks across sectors, you can sign-up right here.