In the third quarter of 2015, Best Buy (BBY, Financial) had over $8.52 billion in sales, while eBay (EBAY, Financial) had just $4.10 billion in their second quarter of this year. But of these two companies, which is the better buy? Comparing both companies' numbers side by side tells a surprising story of which company is the strongest. eBay, with a $33.65 billion market cap, generates $3.41 per share in sales, while Best Buy, with only $11.9 billion market cap, generates over 7x that at $24.74 in sales for every outstanding share. How does a company roughly a third the size of eBay generate seven times as much in sales?
On the cash flow level, eBay narrowly edges out Best Buy with 96 cents per share in cash flow versus Best Buy's 92 cents a share. Though Best Buy has eBay beat when it comes to current assets per share, eBay has negative 60 cents a share in current assets while Best Buy has over $8 a share in current assets. Best Buy has an earnings yield of 7.49%, while eBay trails behind at 6.53%. eBay also lags behind in terms of PE ratio at 15.26 compared to Best Buy's 13.34.
According to Graham and Dodd's "Security Analysis," asset value and earning power are unrelated. While eBay generates significantly more sales and revenue than Best Buy, eBay is also at a disadvantage in this comparison because of how expensive its stock is compared to Best Buy. Currently eBay has a book value of $5.24 and has a P/B ratio of 5.39, while Best Buy has a book value of $13.43 with a P/B ratio of 2.57. Still, Best Buy falls short with its 2.28% net profit margin when eBay has a net margin of almost 13%.
eBay's strength is found and Best Buy's weakness shows in the capital turnover ratio. Taking a look at capital turnover, eBay stands at 18.22 (most likely because of the high sales and revenue it generates), while Best Buy is at 1.89. eBay also edges out Best Buy when it comes to its cash ratio of 0.29 compared to Best Buy's 0.26.Â
As a retailer Best Buy has a much higher accounts receivable turnover rate than eBay, especially because eBay's "inventory" comes from its sellers, while Best Buy purchases their inventory. eBay also has more liquidity than Best Buy as shown in its Quick ratio of 1.67 versus Best Buy's 0.77. Once again, eBay also has an edge over Best Buy with it's current ratio of 1.67, compared to Best Buy's 1.50, showing that eBay may also be healthier as a company.
