Does This Ratio Prove That Etsy Is Now a Value Stock?
One of my favorite quick and easy ways to get a feel for whether a growth stock may be considered a "value" or not is to compare its price-to-free-cash-flow (P/FCF) ratio with its annual sales growth rate. Anytime a company's sales growth comes in higher than its P/FCF multiple, that catches my attention, because it highlights a strong expansion rate at a reasonable price.
One such company is e-commerce specialist Etsy (NASDAQ: ETSY), with its P/FCF of roughly 31 and its annual revenue growth of 62%. At first glance, these figures look incredibly promising and make Etsy look like a screaming buy. However, during the third quarter, its year-over-year sales growth decelerated to 18%, leaving me to wonder -- has Etsy become a value stock?
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Source Fool.com
