Google & Facebook P/E & SBC (stock based compensation)
Google/Alphabet P/E: at 18.8x is materially below the median value from the last almost 8 years of 30.5x with a 261% return ... Cheapish ?

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Google SBC (stock based compensation) overview:

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$META P/E at 8.9x is materially below the median value from the last almost 8 years of 31.9x ... with just a 19% return ... Cheapish ?

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$META SBC (stock based compensation) overview:

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Jonathan Garcia's avatar
Interesting. you have thoughts on SBC? Read an article recently that stock based compensation can be offset by tax savings and buybacks.
Maverick Equity Research's avatar
@toasty_trading many thoughts on SBC: company growth, retain talent, valuation? Depends how you see it & what one is looking into: stage of the company, how much is it out of Revenue for example ... tax savings are small ... buybacks indeed can offset it ... in short SBC gives optionality to the company as it retains cash and increases solvency ... how to treat it in a DCF is debatable ... one thing is for sure: when somebody tells you SBC does not matter beware ... especially if it is more than 5-10% of Revenues and increasing ...

Have an exchange here with the one & only Damodaran ;) https://mobile.twitter.com/Maverick_Equity/status/1585991105942032384

I still need to reply to him to see if I am getting it right truly and how we should really approach in a valuation ... imo a company with X amount of SBC should be valued higher than another company with same X amount but cash salary ... cash gives optionality especially for smaller companies & increases solvency ... nuances but still ... they matter when we plug & chug stuff into the DCF
Jonathan Garcia's avatar
Ahh nice. Damodaran. Thanks for sharing. Very insightful. Personally, I’m thinking that SBC should not be added back. Could the retained cash be treated as equity since the company is essentially giving away equity for cash? It’s reminding of how some argue that certain reserves like deferred tax should be treated as equity, with a return earned on it. Does that make sense? I’m still learning in school haha.

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