Given the payments segment, we can also compare eBay Inc (NASDAQ:EBAY) to American Express Company (NYSE:AXP) and to Mastercard Inc (NYSE:MA). American Express delivered very low growth in both revenue and net income last quarter compared to the first quarter of 2012. Its trailing earnings multiple is 17; we’d generally have to see better financials in order to find a company intriguing at that pricing and so we would avoid it. Mastercard also looks a bit expensive to us, with trailing and forward P/Es of 24 and 17 respectively. Recent earnings growth has been very high in percentage terms, but that has been due to a very low base rate of net income and revenue numbers have been less impressive and certainly not strong enough for us to recommend the stock.
eBay Inc (NASDAQ:EBAY) and its peers are outside value territory, so the question is which of these companies- if any- can produce enough earnings growth to make their current price look reasonable. eBay Inc (NASDAQ:EBAY) actually seems to be one of the stronger candidates in relative terms in that regard, and therefore might be more worthy of further research than the other companies we’ve discussed. However, we would have to become more convinced of the prospects for sustainable earnings growth before thinking of it as a buy.
Disclosure: I own no shares of any stocks mentioned in this article.