I admit I don't fully understand financial analysis, so I don't understand how he got to $10. However I do know math and I figure I could do a reasonable comparison of stock prices. What I wanted was an apples to apples comparison between FB and GOOG. To do this I figured out what FB's price should be if it were valued like GOOG.
What I needed to know were the number of shares outstanding, the current stock price, and their revenues. A simple lookup gives me the first two items, and I have the last one from the article itself.
To get the values in terms of revenues, I multiplied the number of stock outstanding with the stock price, and then divided by the revenue. This gets me the stock to revenue ratio of GOOG.
Shares * Price
-------------- = Stock to Revenue ratio
Revenue
Comments
I admit I don't fully understand financial analysis, so I don't understand how he got to $10. However I do know math and I figure I could do a reasonable comparison of stock prices. What I wanted was an apples to apples comparison between FB and GOOG. To do this I figured out what FB's price should be if it were valued like GOOG.
What I needed to know were the number of shares outstanding, the current stock price, and their revenues. A simple lookup gives me the first two items, and I have the last one from the article itself.
To get the values in terms of revenues, I multiplied the number of stock outstanding with the stock price, and then divided by the revenue. This gets me the stock to revenue ratio of GOOG.
GOOG's equation looks something like this: 326M * 613 / 36.5B ~= 5.475 S:RKnowing this, I can now start calulating FB's ratio and solve for it's stock price.
2140M * FBStockPrice / 3.71B = 0.576 * FBStockPrice
Solving for FBStockPrice...
0.576 * FBStockPrice = 5.475, FBStockPrice = 9.4917
Refs:
[GOOG]: https://www.google.com/finance?client=ob&q=NASDAQ:GOOG
[FB]: https://www.google.com/finance?client=ob&q=NASDAQ:FB
TL;DR: This doesn't mean anything. I just like math.