Facebook's IPO is set to debut sometime next week, maybe Monday, and boy are people excited about it. Understandably so: What company better represents the world of social media? Or can even compare in hype?
As far as time-wasters and user-friendly stalker services go, Facebook is king of the internet. And like true royalty, the tabloids are littered with speculation. Here's what the rumor mill has established so far:
- Facebook's IPO valuation is expected to be somewhere between $75 billion and $100 billion.
- Reports suggest Facebook's 2011 revenues – mostly advertisements – came in around $4 billion.
- CNBC Julie Boorstein recently tweeted "Sources tell me Facebooks's 2011 revenue was $3.8B, operating profit around $1.5B." This leaked information is basically in line with several reports heard in late 2011.
But we were thinking, with an operating margin of 39.74% (operating profit / revenue = 1.5B / 3.8B = 39.47%) is Facebook really worth a $100 billion valuation?
For those who need a reminder, a company's operating margin tells us the percentage of revenues remaining after all operating expenses are paid. Operating expenses include supplies, wages, repairs, research and development, and depreciation.
If Facebook has a 39.47% operating margin, it means it actually makes $0.3947 (before interest and taxes) for every dollar of sales.
This isn't bad, but it isn't great either.
Business Section: Investing Ideas
With that in mind, we wanted to identify a list of tech companies with higher operating margins than Facebook. These companies are not valued at $100 billion and above, so why is Facebook?
Interactive Chart: Use the Compar-O-Matic to compare analyst ratings for all the stocks mentioned below:
List sorted by operating margin.
2. Check Point Software Technologies Ltd. (CHKP, Earnings, Analysts, Financials): Develops, markets, and supports a range of software, and combined hardware and software products and services for information technology (IT) security applications worldwide. Operating margin at 56.17%.
6. Hittite Microwave Corporation (HITT, Earnings, Analysts, Financials): Designs and develops integrated circuits, modules, and subsystems for technically demanding radio-frequency, microwave, and millimeter-wave applications. Operating margin at 47.77%.
9. SolarWinds, Inc. (SWI, Earnings, Analysts, Financials): Designs, develops, markets, sells, and supports enterprise information technology (IT) infrastructure management software to IT professionals. Operating margin at 43.25%.
(Article by Rebecca Lipman; List compiled by Eben Esterhuizen, CFA)
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Analyze These Ideas: Getting Started
- Read descriptions for all companies mentioned
- Access a performance overview for all stocks in the list
- Compare analyst ratings for the companies mentioned
- Compare analyst ratings to annual returns for stocks mentioned
- Real-Time Opinion: Scan the latest tweets about these companies (feed will open in a new window)
Dig Deeper: Access Company Snapshots, Charts, Filings
- Changyou.com Limited (CYOU, Chart, Download SEC Filings)
- Check Point Software Technologies Ltd. (CHKP, Chart, Download SEC Filings)
- Baidu, Inc. (BIDU, Chart, Download SEC Filings)
- Linear Technology Corp. (LLTC, Chart, Download SEC Filings)
- InterDigital, Inc. (IDCC, Chart, Download SEC Filings)
- Hittite Microwave Corporation (HITT, Chart, Download SEC Filings)
- NetEase.com, Inc. (NTES, Chart, Download SEC Filings)
- Dolby Laboratories, Inc. (DLB, Chart, Download SEC Filings)
- SolarWinds, Inc. (SWI, Chart, Download SEC Filings)
- VeriSign Inc. (VRSN, Chart, Download SEC Filings)
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