Meta Platforms (META) Still A Good Deal Up 430% Since 2022 Low

Meta Platforms (META), the parent company of Facebook, Instagram, and WhatsApp is up 430% from the 2022 low. Despite the big gain in the stock price, META is still a quality stock and is priced attractively after a recent 15% pullback.

Cory Mitchell, an analyst with Trading.biz commented on META. “Meta Platforms is a high-quality company to invest in. Analysts project yearly earnings increases that will be greater over the next five years than the prior five years. And the stock performed very well over the last five years.

The company is buying back shares (as opposed to issuing more) which helps bolster shareholder value. And despite the big percentage gain the stock has seen, it is still undervalued according to the PEG forward ratio and has a lower P/E than the S&P 500.

Impressive considering META’s yearly earnings are expected to increase at a rate of more than 3:1 versus the S&P 500. Bigger growth, cheaper valuation.”

Let’s look at the actual numbers Mitchell is talking about.

• META’s EPS growth is expected to average 30% yearly over the next five years, versus 24.1% average EPS growth per year over the last five years.
• For comparison, the median EPS increase for the S&P 500 is expected to be 9.3% per year over the next five years. Meta is expected to grow 3.2 times as much per year, on average.
• Meta Platforms has beaten S&P 500 returns by an average of 7.4% per year over the last decade.
• The company has a buyback yield of 2.6%. This is when the company buys back shares so there are fewer shares outstanding, and thus profits are split between fewer shareholders in the future.
• META’s Price/Earnings ratio is 26.8 and the forward P/E is 20.1.
• For comparison, the P/E for the S&P 500 index is 28.55, with a forward PE near 22. META is cheaper than buying an S&P 500 index in terms of valuation, and is expected to grow at more than triple the rate of the S&P 500 in terms of earnings.
• META’s Price Earnings Growth forward ratio (PEG forward) looks at the P/E compared to expected earnings growth over the next five years. Meta has a ratio of 0.8. A reading near 1 is considered fairly valued, over 1 is overvalued, and under 1 is undervalued.

Technically, META is near the middle to lower half of the range it has been in since February.

Overall, the stock is in fundamentally good shape. Consider an entry point that works for the desired time horizon of the trade. Also consider the stop loss level, which will be the exit point if fundamentals change or the stock doesn’t rise after entry. Plan out the target price, or how a profitable trade will be exited.

Like a chess player, plan ahead to avoid making mistakes when emotions are high(er) during the trade.