FANG: An In-Depth Comparison Of Amazon, Facebook, Google And Netflix Across 13 Categories

seekingalpha2021-03-18

Summary Several Seeking Alpha readers have reached out to me for an opinion about which FANG stock represents the best valuation for a new investment. I conducted a 13-category analysis across AMZN, ...

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Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

Caipok
2021-03-18
Caipok
Strong profitable company still
Big__Boss
2021-03-18
Big__Boss
nice
Eaglewings
2021-03-18
Eaglewings
I suspect Apple will outshine all the FANG
EzzyDibz
2021-03-18
EzzyDibz
Like and comment please!
西红柿炒韭菜
2021-03-18
西红柿炒韭菜
Apple?
- 小叮当379Reply西红柿炒韭菜:
  [财迷][财迷][财迷]
- 西红柿炒韭菜:
  Lol~
- 西红柿炒韭菜:
  Lol
- 小叮当379:
  hhh
chiin
2021-03-18
chiin
Doesn't apply to Covid
- AshleyKinson:
  [开心]
- chiin:
  ?

Leave a comment

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I have written several articles onAMZNandFBand several Seeking Alpha readers have asked me if I had to choose one of the original FANG stocks to invest in which would it be? It’s a great question that I have never thought about. Putting the businesses aside I decided to tear through the numbers and form an opinion as my curiosity was now stimulated. All 4 companies have generated unbelievable returns for their shareholders over the years but the question isn’t about the past, it’s about the future.\nI am going to focus on the numbers and determine which company is growing at the quickest pace, who has the best margins and which company has the best ratios. My analysis will focus on the income statements and balance sheets from each company's financials at the end of fiscal year 2020. I am going to put AMZN, FB, GOOGL and NFLX head to head across 13 categories and award 1 point to the winner of each. In the end I will tally up the points and determine a winner based on my findings.\nFrom the income statement, I am going to evaluate each company's revenue growth, gross profit margin, net income growth, gross profit margin, net income conversion and their P/E ratios. On the balance sheets, I am going to compare their total cash and short-term investments, total asset position and growth, return on asset ratio, total long-term debt to total cash and short-term investment ratio, total equity growth, total equity to total asset ratio and each company's total equity to market cap ratio. For full transparency, I am a shareholder of AMZN, FB and GOOGL, but that will not affect my analysis as I am going strictly by the numbers.\n(Source:Stockprice)\nA brief overview of Amazon, Facebook, Google and Netflix’s 2020 numbers\nBefore I conduct the analysis, I want to build a financial profile for all of the readers.\nAMZN\n\nIncome Statement\nBalance Sheet\n\nFB\n\nIncome Statement\nBalance Sheet\n\nGOOGL\n\nIncome Statement\nBalance Sheet\n\nNFLX\n\nIncome Statement\nBalance Sheet\n\n(Source Steven Fiorillo) (Data Source: Seeking Alpha)\nAn in-depth analysis of Amazon, Facebook, Google and Netflix’s Income Statements from the close of 2020\nIn the first category, I am looking at each company’s 3-year average revenue growth. AMZN grew its annual revenue by $208.20 billion (117.05%) over the last 3 fiscal years and has an average annual revenue growth rate of 29.67%. Over the same time period FB has grown their annual revenue by $45.31 billion (111.46%) and has an average annual growth rate of 28.52%. GOOGL has increased its revenue on an annual basis over this period by $71.67 billion (64.55%) and has an average annual growth rate of 18.16%.\nOver the past 3 fiscal years NFLX has increased its annual revenue by $13.30 billion (113.78%) and their average annual growth rate is 28.90%. Point AMZN as they increased their annual revenue by the largest amount, had the largest percentage increase and the highest 3-year annual revenue growth rate.\nAMZN: 1 Point for revenue growth.\nScore:\n\nAMZN – 1\nFB – 0\nGOOGL – 0\nNFLX – 0\n\n(Source: Steven Fiorillo) (Data source: Seeking Alpha)\nRevenue is just one component of an income statement and a winner can’t be crowned simply by how much revenue they generate or how quickly their revenue is growing. Businesses are in the business of making money so it’s critical to identify how much of the revenue is flowing to the bottom line. At the end of the day, investors want to see profits so that’s where I am looking next.\nAMZN has grown its annual gross profit by $86.83 billion (131.69%) over the past 3 fiscal years at an average annual growth rate of 32.56%. Over the same time period, FB has increased its annual gross profit by $34.07 billion (96.80%) at an average annual growth rate of 25.42%. GOOGL has seen its average annual gross profit increase by $32.52 billion (49.83%) at an average annual rate of 14.50% over the past 3 fiscal years. NFLX saw the largest percentage increase as their gross profit increased by $6.06 billion (165.59%) at an average annual rate of 39.20% over this period.\nEven though NFLX had the largest percentage increase, I am giving the point to AMZN. While NFLX did grow their annual gross profit by 165.59%, they started from a much lower position. In fiscal year 2017 NFLX generated $3.66 billion in gross profit while AMZN produced $65.93 billion. Over the past 3 fiscal years AMZN grew its gross profit by an additional 1,433% than NFLX did. AMZN started from a much larger position, generated an additional $80.77 billion in gross profit than NFLX and had an average annual gross profit growth rate of 32.56%. Some may disagree but I am calling AMZN the winner here.\nAMZN: 1 Point for gross profit growth.\nScore:\n\nAMZN – 2\nFB – 0\nGOOGL – 0\nNFLX – 0\n\n(Source: Steven Fiorillo) (Data source: Seeking Alpha)\nAfter all the expenses are deducted from the revenue, we’re left with the net income. Over the past 3 fiscal years, AMZN has increased its net income by $18.30 billion (603%) and has had an average net income growth rate of 110.41%. FB has increased their annual net income by $13.21 billion (82.92%) at an average growth rate of 26.68%. GOOGL has seen their annual net income over the same time period increase by $27.61 billion (218.03%) at an annual average growth rate of 57.24%. NFLX increased their annual net income by $2.20 billion (394.08%) at an average annual growth rate of 72.92%.\nThe same way I didn’t go with NFLX for gross income growth, I am not giving the point to AMZN here. Yes, they increased their net income over the past 3 fiscal years by 603.3% but they started from a much lower position and generated 212% more revenue than GOOGL. GOOGL generated $182.53 billion in total revenue and turned $40.27 billion into net income for 2020. While AMZN did have the largest percentage growth over the 3-year period and the highest average annual growth rate, GOOGL generated an additional $9.31 billion (151%) of new net income over the past three years than AMZN did while producing less than half of AMZN’s revenue. GOOGL is my winner for this category.\nGOOGL: 1 Point for net income growth.\nScore:\n\nAMZN – 2\nFB – 0\nGOOGL – 1\nNFLX – 0\n\n(Source: Steven Fiorillo) (Data source: Seeking Alpha)\nNext, I am looking at the margins and gross income is first. If you readWarren Buffet and the Interpretation of Financial Statementson page 34 of the Kindle edition it says,\n\n As a very general rule (and there are exceptions): Companies with gross profit margins of 40% or better tend to be companies with some sort of durable competitive advantage. Companies with gross profit margins below 40% tend to be companies in highly competitive industries, where competition is hurting overall profit margins (there are exceptions here, too).\n\nOn the surface, the larger a company's gross profit margin is, the less their revenue costs to generate. I look at the gross profit margin because it tells me how much of a company's revenue goes directly to producing it and if they have a moat around their business. AMZN had a gross profit margin of 39.57% in 2020 and their 3-year average was 40.27%. FB had a gross profit margin of 80.58% in 2020 which is one of the largest I have ever seen.\nTo make sure this wasn’t an anomaly or a fluke, I went back further than 3 years. Over the past 3 years FB had an average gross profit margin of 81.92% and over the past 10 years their average gross profit margin was 82.28%. GOOGL generated a gross profit margin of 53.58% in 2020 and their 3-year gross profit margin average is 55.21%. In 2020 NFLX produced a gross profit margin of 38.88% and their 3-year average is 38.02%.\nFB is the clear winner as they simply dominate AMZN, GOOGL and NFLX in this category. While AMZN and GOOGL generated more revenue and gross profit than FB, the margins are simply too large to ignore. FB isn’t a small company cornering the market on an obscure widget and generating $1 million dollars in revenue. In 2020 FB generated $85.97 billion in revenue, generated $69.27 billion in gross profit and had a gross profit margin of 80.58%. FB has held an average gross profit margin of over 80% for the past decade so this isn’t a fluke. Point FB.\nFB: 1 Point for gross profit margin.\nScore:\n\nAMZN – 2\nFB – 1\nGOOGL – 1\nNFLX – 0\n\n(Source: Steven Fiorillo) (Data source: Seeking Alpha)\nMy next category is net income conversion rate, which is something people rarely discuss. This metric is one of the most important to me because it indicates exactly how much of a company's revenue becomes pure profit. As an investor, profits are extremely important to me. Companies with larger profits can erase liabilities, build their war chest, buy back stock, pay a dividend, expand into new business segments and invest more in their company.\nIn 2020 AMZN generated $21.33 billion in net income and had a net income conversion rate of 5.53%. FB produced $29.15 billion in net income and converted 33.90% of its revenue into net income. FB has an average net income conversion rate for the past 3 years of 33.22% and 26.70% for the past decade so this wasn’t an anomaly. GOOGL generated $40.27 billion in net income from their revenue giving them a net income conversion rate of 22.06% in 2020. NFLX was able to convert 11.05% of their revenue to net income in 2020.\nGOOGL did generate the most net income but they generated more than double the revenue than FB did in 2020. GOOGL had a net income conversion rate of 22.06% while FB’s was 33.90%. FB converts just over 1/3rdof their revenue into profit while GOOGL is working its way to converting 1/4thof their revenue. FB is the winner in the net income conversion category.\nFB: 1 Point for net income conversion.\nScore:\n\nAMZN – 2\nFB – 2\nGOOGL – 1\nNFLX – 0\n\n(Source: Steven Fiorillo) (Data source: Seeking Alpha)\nThe last area I am going to evaluate, which I consider to be associated with the income statement, is the P/E ratio for each company. Investors use theP/E ratioto determine the market value of a stock compared to the company's earnings. The P/E ratio indicates how much investors are willing to pay per dollar of earnings. The P/E ratio is determined by dividing the current stock price by the earnings per share (EPS). After the market closed on 3/16/21, FB had the lowest P/E ratio at $27.40 with GOOGL taking 2ndwith $35.25. I am awarding FB the point as they have the lowest P/E ratio.\n(Source: Steven Fiorillo) (Data Source: Seeking Alpha)\nFB: 1 Point for P/E ratio.\nScore:\n\nAMZN – 2\nFB – 3\nGOOGL – 1\nNFLX – 0\n\nFANG Income Statements and My Calculations:\n(Source: Steven Fiorillo) (Data Source: Seeking Alpha)\nAn in-depth analysis of Amazon, Facebook, Google and Netflix’s Balance Sheets from the close of 2020\nCurrently based off of my income statement analysis, FB has racked up the most points taking 3 categories, AMZN is in 2ndwith 2 points, GOOGL is in 3rdwith 1 point and NFLX is yet to get on the board. Now I am going to analyze the balance sheets of the FANG’s and look at 7 specific categories which include:\n\nTotal cash and short-term investment position and growth\nTotal asset position and growth\nReturn on assets\nTotal equity growth\nTotal Long-Term Debt to Total Cash and ST Investment Ratio\nTotal equity to total asset ratio\nTotal equity to market cap ratio\n\nOne of the first things I look at is the total cash and short-term investments. When a company has a large amount of cash and highly liquid short-term investments, it indicates that they have a competitive advantage that is generating large amounts of profits. I always look at the trend over 3-5 years because an anomaly in this category could indicate a bond sale.\nAMZN finished 2020 with $84.40 billion in cash and short-term investments. Over the past 3 years AMZN’s liquidity position has grown by $53.41 billion, or 172.37%. Their annual average growth rate over the past 3 years was 39.97%. FB finished 2020 with $61.95 billion in cash and short-term investments. Over the past 3 years this position has grown by $20.24 billion, or 48.53%, with an average 3-year growth rate of 14.98%.\nOut of the FANG stocks GOOGL finished the year with the largest war chest as their cash and short-term investments grew to $136.70 billion. Over the past 3 years this stockpile has grown by $34.82 billion (34.18%) at an average 3-year annual rate of 10.34%. NFLX has the least amount of assets in this category as they ended 2020 with $8.21 billion in cash and short-term investments. NFLX has grown their pile of cash by $5.38 billion by 190.70% over the past 3 years at an average annual rate of 43.40%.\nWhile GOOGL had the largest stockpile and NFLX had the best % gains, I am awarding the point to AMZN. AMZN’s average growth rate was almost 4x while they generated 1.53x the amount of cash compared to GOOGL over the past 3 years.\nAMZN: 1 Point for total cash and short-term investment position and growth.\nScore:\n\nAMZN – 3\nFB – 3\nGOOGL – 1\nNFLX – 0\n\n(Source: Steven Fiorillo) (Data source: Seeking Alpha)\nNext I am going to evaluate each of the FANG stocks total asset position and growth. A company's assets include everything of value from the cash stockpile, the patents to the property, plants and equipment. AMZN finished 2020 with $321.20 billion in assets as they grew by $189.89 billion (144.61%) over the past 3 years at an annual rate of 34.98%. FB finished 2020 with $159.32 billion in assets as they increased by $74.79 billion (88.49%) over the past 3 years at an annual rate of 23.88%.\nGOOGL finished 2020 with the 2ndlargest amount of assets valued at $319.62 billion as they grew by $122.32 billion (62%) at an average annual rate of 17.45%. NFLX finished 2020 with the least amount of assets of the FANG stocks with $39.28 billion which increased by $20.27 billion (106.60%) over the past 3 years at an average rate of 27.68%. In this category, AMZN is the clear winner as they had the largest total assets, the largest asset base increase over the past 3 years and the highest annual growth rate.\nAMZN: 1 Point for Total asset position and growth.\nScore:\n\nAMZN – 4\nFB – 3\nGOOGL – 1\nNFLX – 0\n\n\n(Source: Steven Fiorillo) (Data source: Seeking Alpha)\nThereturn on asset ratiois critical because it indicates how much of a profit their assets can generate. Return on asset ratio is calculated by dividing net earnings by total assets. AMZN finished 2020 with $321.20 billion in total assets which generated $21.33 billion in net income. This is a return on asset ratio of 6.64%. FB generated $29.15 billion in net income off their $159.32 billion in assets in 2020 for a return on asset ratio of 18.29%.\nGOOGL generated $40.27 billion in net income from $319.62 billion in assets giving them a return on asset ratio of 12.60% in 2020. NFLX generated $2.76 billion in net income off their $39.28 billion in assets for 2020. In this category the point goes to FB as they have the superior return on asset ratio.\nFB: 1 Point for return on asset ratio.\nScore:\n\nAMZN – 4\nFB – 4\nGOOGL – 1\nNFLX – 0\n\nSticking with the assets and liabilities, I look for how much long-term debt a company has on its balance sheet and if that liability can be eliminated on a moments notice. I tend to favor companies that have more liquidity in their cash and short-term investments than they carry in long-term debt.\nAMZN has $84.40 billion in cash and equivalents and $31.82 billion long-term debt. This creates a long-term debt to cash and equivalent ratio of 37.70%. AMZN could pay off their long-term debt tomorrow and still have 72.30% of their liquidity available. FB is an anomaly in this category as they haven’t carried long-term debt on their balance sheet since 2012. There aren’t many companies which have grown organically without taking on debt.\nWith $61.95 billion in cash and cash equivalents on the books and zero long-term debt, FB is in a unique position. GOOGL finished 2020 with $12.83 billion in long-term debt and $136.70 billion in cash and equivalents creating a ratio of 9.39%. Of the FANG stocks, NFLX is the only company that’s long-term debt obligations exceeded their cash and equivalents on hand. NFLX finished 2020 with $8.21 billion in cash and equivalents and $15.81 billion in long-term debt for a ratio of 192.66%.\nI am calling this a tie between GOOGL and FB. While FB has carried $0 in long-term debt since 2012, GOOGL has carried less than 10% of its cash and equivalents on an annual basis since 2012. If GOOGL wanted to, they could pay their long-term debt tomorrow and have roughly double the cash and equivalents that FB does. The only reason I am not giving the full point to GOOGL is because FB has kept its balance sheet clean and incurs $0 in interest on $0 of long-term debt.\nGOOGL and FB: ½ point for Total Long-Term Debt to Total Cash and ST Investment Ratio.\nScore:\n\nAMZN – 4\nFB – 4.5\nGOOGL – 1.5\nNFLX – 0\n\n(Source: Steven Fiorillo) (Data source: Seeking Alpha)\nI am always interested in how quickly a company is growing its total equity as this indicates the net worth of the company when all the liabilities are deducted from the assets. In 2020, AMZN had $93.40 billion in equity which was an increase of $65.70 billion (237.09%) over 3 years at an annual growth rate of 50.06%. FB finished 2020 with $128.29 billion in equity which was an increase of $53.94 billion (72.56%) at an annual growth rate of 20.08%.\nGOOGL finished 2020 with $222.54 billion in equity which grew by $70.04 billion (45.93%) over the past 3 years at an average growth rate of 13.45%. NFLX grew its equity to $11.07 billion in 2020 which was an increase of $7.48 billion (208.91%) over the past 3 years at an average annual rate of 45.64%.\nEven though AMZN increased its equity by 237.09% over the past 3 years, I am awarding GOOGL the point. At the end of 2017, GOOGL had $152.50 billion in equity which was 61.25% larger than AMZN’s total equity in 2020. GOOGL grew its equity by an additional $4.35 billion over the past 3 years compared to AMZN, while starting from a much larger position at the beginning of 2018. I have to give credit where credit is due and for GOOGL to grow its equity to $222.54 billion is something not many have achieved. Point GOOGL.\nGOOGL: 1 point for total equity growth.\nScore:\n\nAMZN – 4\nFB – 4.5\nGOOGL – 2.5\nNFLX - 0\n\n\n(Source: Steven Fiorillo) (Data source: Seeking Alpha)\nThe next ratio I like to evaluate is the total equity to total asset ratio of a company. This allows me to see how much of a company's assets convert to equity while illustrating how efficiently the organization operates. Having limited liabilities is something every company should strive for. At the end of 2020 29.08% of AMZN’s assets converted to equity. FB had a total equity to asset ratio of 80.53% as there are limited liabilities on the balance sheet. GOOGL had the 2ndbest ratio as 69.63% of their assets convert into equity. At the end of 2020, NFLX had a ratio of 28.17% for equity to assets. I am giving this category to FB as they have converted just over 4/5thsof their assets to equity in the company.\nFB: 1 point for total equity to total asset ratio.\nScore:\n\nAMZN – 4\nFB – 5.5\nGOOGL – 2.5\nNFLX - 0\n\nThe last category I am going to evaluate is each company's total equity to market cap ratio. This isn’t something everyone looks at but I like seeing the multiple the market is putting on a company's equity. FB and GOOGL are neck and neck with their equity to market cap multiple and % of equity to market cap, so I am going to split the point between the two. Both companies exceed AMZN and NFLX by a great deal in both categories and, due to the size of equity GOOGL has, I am calling it a tie.\nGOOGL and FB: ½ point for total equity to market cap ratio.\nScore:\n\nAMZN – 4\nFB – 6\nGOOGL – 3\nNFLX – 0\n\n(Source: Steven Fiorillo) (Data source: Seeking Alpha)\nFANG Balance Sheets and My Calculations:\n(Source: Steven Fiorillo) (Data Source: Seeking Alpha)\n1stplace goes to Facebook, 2ndplace Amazon and a close 3rdGoogle with Netflix not picking up a single point\nAfter analyzing 13 different categories from the income statement and balance sheet of the original FANG stocks, I have FB as my winner as they took the point in 5 categories and split 2 categories with GOOGL earing a ½ point in those.\n\n(Source: Steven Fiorillo)\nConclusion\nI would be a buyer of AMZN, FB and GOOGL here as I believe they all present an investment opportunity for share appreciation. The goal of this article was to determine, if I had to pick one to invest in, which FANG stock would I go with. As a shareholder of AMZN, FB, GOOGL, it’s a question that I never contemplated. AMZN’s revenue and gross profit growth is massive, FB does an amazing job converting its revenue to gross profit and net income and GOOGL's net income and total equity growth is hard to match.\nIn the end, FB looks like the best investment based on the numbers today, as they have the best margins, the lowest P/E ratio, the best return on assets and their equity multiple to market cap was slightly lower than GOOGL’s. The numbers always illustrate a story - it’s a matter of how you interpret the data. Based on the 13 categories I analyzed, FB presents the best opportunity at the current valuations.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[{"id":327650785,"gmtCreate":1616081778747,"gmtModify":1704790793068,"author":{"id":"3572601977225346","authorId":"3572601977225346","authorIdStr":"3572601977225346","name":"Caipok","avatar":"https://static.tigerbbs.com/703dc96833e044e2e753c8ba28412c9c","vip":1,"hat":"https://static.tigerbbs.com/0a8758340a08196056f8bc1e54805193","crmLevel":3,"crmLevelSwitch":1,"idStr":"3572601977225346"},"htmlText":"Strong profitable company still","listText":"Strong profitable company still","text":"Strong profitable company 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