Question
I chose Meta (FB), Snapchat (SNAP), and Twitter (TWTR) for this research as they are three of the top-performing social media corporations on the stock
I chose Meta (FB), Snapchat (SNAP), and Twitter (TWTR) for this research as they are three of the top-performing social media corporations on the stock market. Through the data collected including the financial ratios, investors can make comparisons to decide on which companies to invest in. The revenues reveal that Meta, the parent company of social media website Facebook, had the highest revenue reaching over one hundred billion dollars whereas the other two companies are in the mere billions of dollars. To be precise, the 2021 revenue was a continuous streak of increase from the previous year with 37.18%. Similarly, Twitter had a 36.63% increase from 2020 to 2021 with 5.077 billion, and Snapchat with the highest number of 64.25% increase from the previous year. All three revenues with increase demonstrated that the companies performed well in recent years. Moving on to the collected price-to-earnings ratios, these numbers reveal the price of a company's stock to its earnings per share. In this category, FB had the highest ratio of 24.37 in comparison to 0.00 of both SNAP and TWTR. A lower ratio is preferable; thus, Facebook's number can signal to an investor that the company has overvalued stock. Debt to equity ratio ideally should be less than 1. In 2021, all three companies managed to have <1 debt-to-equity ratio. However, both Snapchat and Twitter had higher numbers, signaling to investors that they might face risks investing in the companies since the company was heavily relying on debt to finance its growth. The current ratio, a liquidity ratio, demonstrates to investors a company's capability to pay back its short-term debt. A ratio of less than 2 indicates that the company is capable. In this case, Snapchat was the safest option and Facebook trialing closely with 3.15. Twitter, however, had an alarmingly high ratio of 5.89. In the same year, earnings per share of the three companies varied as well. Facebook, being the only corporation with a positive number of $13.77, showed that the shares were profitable that year. Snapchat and Twitter's shares on the other hand were not profitable in 2021. Return-on-sales (ROS) ratio of Meta was the highest out of all three companies in 2021 with 0.396 in comparison to -0.17 and 0.09. This number specifically indicated that Meta was generating more income from sales than the other two companies. Lastly, the return-on-equity (ROE) ratio reveals how much a firm earned for each dollar invested by the owners. In this case, an ROE ratio above 15% is a good return. Thus, Meta was the best firm in generating income from investment. Meta would be the best firm to invest in as it performed extremely well in 2021 with the highest revenue, EPS, and ROE ratio overall.
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