FWIW, The valuation is even more out of wack since this published.
12/13/98
Bid.com International (Toronto : BII.TO)
Current Price : C $2.76
Bid.com is an Canadian-based auction etailer. The company's website offers a wide variety of products including computers, electronic items and office machines. As the table below indicates, Bid.com's largest problem has been the Company's gross margins. This has led to Bid.com's low stock valuation compared to the other companies in this group. If the Company is able to attract more customers to its website (thereby increasing its margins) and continue to grow its revenues, the stock price could skyrocket. However, this is a large assumption. The Company has failed to obtain significant margins in its last six quarters despite its massive advertising campaign. In addition, its lack of exposure because of its location on the Toronto exchange does not give it the volume or institutional backing that it would receive if traded on the Nasdaq. All money values listed below are in Canadian dollars.
Quarter
Revenues
Quarterly Growth
Gross Profit
Gross Margin
Marketing
% of Revenues
Net Income
EPS
September 30, 1998
$6,290,003
12.4%
$203,044
3.2%
$3,333,907
53.0%
$(4,789,866)
$(0.23)
June 30, 1998
$5,593,742
205.9%
$51,358
0.1%
$3,427,833
61.3%
$(4,829,698)
$(0.23)
March 31, 1998
$1,828,782
22.3%
$35,663
2.0%
$2,140,097
117.0%
$(3,256,144)
$(0.17)
December 31, 1997
$1,495,376
124.4%
$34,046
2.3%
$1,287,716
86.1%
$(3,052,458)
$(0.11)
September 30, 1997
$666,387
37.0%
$(257,623)
(38.7%)
$972,677
146.0%
$(2,246,051)
$(0.19)
June 30, 1997
$486,245
1,997.2%
$(24,613)
(5.1%)
$227,056
46.7%
$(894,742)
$(0.20)
March 31, 1997
$23,185
$3,015
13.0%
$34,123
147.2%
$(532,169)
$(0.05)
Current Assets
$9,804,150
Current Liabilities
$3,155,088
Total Assets
$10,486,761
Long Term Debt
$0
Market Capitalization
$57,477,000
Shareholder Equity
$7,331,673
eBay, Inc. (Nasdaq : EBAY) Current Price : 192
eBay has taken a different approach to its auction format than the other companies in this group. Rather than purchase merchandise and auction it to the highest bidder, eBay allows its own customers the opportunity to sell their own items in an auction format. eBay charges a fee for each item auctioned and collects a commission of the actual sale price. This business model has worked well for eBay. It has managed to maintain gross margins in the mid-eighty percent range. Also, the Company has earned a profit in each of its last seven quarters. For this success, the markets have placed a high premium on the stock. eBay is currently a $7.7 billion dollar company – quite an accomplishment for a company whose revenues where $30 million for the last four quarters and who had net income of a little over $1 million in that time.
Quarter
Revenues
Quarterly Growth
Gross Profit
Gross Margin
Marketing
% of Revenues
Net Income
EPS
September 30, 1998
$12,935,000
44.7%
$10,832,000
83.7%
$5,476,000
42.3%
$663,000
$0.02
June 30, 1998
$8.941,000
49.5%
$7,835,000
87.6%
$2,504,000
28.0%
$134,000
$0.00
March 31, 1998
$5,981,000
127.7%
$5,351,000
89.5%
$2,106,000
35.2%
$214,000
$0.01
December 31, 1997
$2,627,000
80.1%
$2,294,000
87.3%
$1,149,000
43.7%
$189,000
$0.01
September 30, 1997
$1,459,000
38.4%
$1,206,000
82.7%
$369,000
25.3%
$199,000
$0.01
June 30, 1997
$1,054,000
74.5%
$927,000
88.0%
$129,000
12.2%
$293,000
$0.01
March 31, 1997
$604,000
$571,000
94.5%
$83,000
13.7%
$193,000
$0.01
Current Assets
$82,131,000
Current Liabilities
$7,264,000
Total Assets
$89,500,000
Long Term Debt
$94,000
Market Capitalization
$7,730,702,016
Shareholder Equity
$81,985,000
Egghead.com (Nasdaq : EGGS) Current Price : 19 11/16
Quarter
Revenues
Quarterly Growth
Gross Profit
Gross Margin
Marketing
% of Revenues
Net Income
EPS
September 26, 1998
$35,054,000
18.7%
$3,712,000
10.6%
$6,920,000
19.7%
$(7,199,000)
$(0.30)
June 27, 1998
$29,520,000
$3,057,000
10.4%
$5,768,000
19.5%
$(5,549,000)
$(0.24)
Current Assets
$80,928,000
Current Liabilities
$33,439,000
Total Assets
$117,253,000
Long Term Debt
$0
Market Capitalization
$480,277,429
Shareholder Equity
$83,814,000
ONSALE, Inc. ( Nasdaq : ONSL) Current Price : 39 15/16
Quarter
Revenues
Quarterly Growth
Gross Profit
Gross Margin
Marketing
% of Revenues
Net Income
EPS
September 30, 1998
$57,825,000
13.8%
$6,171,000
10.7%
$6,493,000
11.2%
$(3,291,000)
$(0.17)
June 30, 1998
$50,796,000
26.5%
$4,658,000
9.2%
$4,802,000
9.5%
$(4,037,000)
$(0.21)
March 31, 1998
$40,169,000
21.6%
$3,491,000
8.7%
$3,974,000
9.9%
$(4,191,000)
$(0.22)
December 31, 1997
$33,031,000
31.8%
$3,715,000
11.2%
$2,612,000
7.9%
$(1,715,000)
$(0.09)
September 30, 1997
$25,061,000
34.9%
$3,952,000
15.8%
$2,771,000
11.1%
$(583,000)
$(0.03)
June 30, 1997
$18,575,000
50.8%
$2,429,000
13.1%
$948,000
5.1%
$(226,000)
$(0.01)
March 31, 1997
$12,314,000
48.3%
$1,788,000
14.5%
$390,000
3.2%
$52,000
$0.01
December 31, 1996
$8,306,000
$1,230,000
14.8%
$379,000
4.6%
$140,000
$0.01
Current Assets
$64,919,000
Current Liabilities
$15,796,000
Total Assets
$70,238,000
Long Term Debt
$2,000,000
Market Capitalization
$766,355,415
Shareholder Equity
$52,442,000
uBid, Inc. (Nasdaq : UBID) Current Price : 36 ½
Quarter
Revenues
Quarterly Growth
Gross Profit
Gross Margin
Net Income
EPS
September 30, 1998
$15,299,000
126.6%
$1,253,000
8.2%
$(1,092,000)
$(0.15)
June 30, 1998
$6,751,000
225.3%
$496,000
7.3%
$(993,000)
$(0.14)
March 31, 1998
$2,075,000
$184,000
8.9%
$(895,000)
$(0.12)
Current Assets
$5,007,000
Current Liabilities
$5,631,000
Total Assets
$6,048,000
Long Term Debt
$0
Market Capitalization
$325,178,500
Shareholder Equity
$(3,292,000)
Egghead.com, ONSALE, and uBid all compete with similar products and websites. These companies also have gross margins around 10%, no long-term debt, double digit quarterly sales growth, and similar marketing expenditures. ONSALE was the first and leads the pack in revenues, with Egghead.com and uBid several quarters behind. In valuation terms, uBid has the highest valuation (trading at 21x last quarter's revenues – where Egghead and ONSALE are trading at 13.5x last quarter's revenues).
In summary, Bid.com has the lowest valuation and is the riskiest investment, while eBay is trading with a huge premium given its profitablitiy. Of the other three companies, uBid is currently trading at a higher revenue multiple than its closest competitiors – Egghead.com and ONSALE.
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