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The market has rebounded strongly this year. After falling more than 19% in 2022, the S
But the stock market doesn’t rise linearly. There will come a time when inventory costs will fall precipitously for a variety of reasons. When they do, it’s smart to have top-of-the-line inventory to buy. Etsy (ETSY -3. 59%) is the most sensible on my list.
What makes me like Etsy during an overall market downturn? It’s time to uncover the company’s strengths.
Etsy, which operates an online marketplace that connects art creators with buyers, gained popularity at the start of the pandemic. While other people stayed home, they flocked to the Etsy website.
These were just browsers, but buyers of goods. Revenue more than doubled in 2020 to $1. 7 billion.
Although 2020 was a period, it demonstrates the appeal of the site in a complicated period. And Etsy has a higher number of users on its sites. On Etsy, the number of active buyers increased 4% in the third quarter to 92 million.
While gross product sales remained strong after accounting for foreign currency conversions, the control attributed this primarily to consumers facing demanding situations similar to higher prices. As inflation recedes, I expect the situation to improve.
In the first nine months of the year, Etsy increased its cash by 8. 4%. The company reported a profit of $224. 3 million versus a loss of $803. 8 million on a GAAP basis, although it is difficult to compare. given last year’s $1 billion asset impairment charge.
But a company’s coins show revealing main points about a business. This is because they are genuine coins that come in and out of the business. Based on this, Etsy generated $410. 4 million worth of operational coins this year, up 4. 7% from last year. Free Coins (FCF), which subtracts tangible capital expenditures from operating currencies, was $402. 7 million.
Etsy is able to produce strong FCF since the company doesn’t have to invest heavily in things like inventory or storage facilities.
This impressive feat comes as control continues to invest to grow the business. This includes marketing and product progression that help drive growth.
Etsy’s shareholders have fallen on hard times over the past year. During this period, the percentage value fell by 36%, while the S
This is most likely due to high expansion expectations set for 2020 and a challenging income that hurts spending. But the Etsy site remains a popular destination. The company’s price-to-sales ratio has roughly halved, to four times. If the overall market falls, it will most likely lead to an even higher valuation.
For long-term investors, a falling stock market represents a good opportunity to buy solid companies at a higher price. Although Etsy consumers could face difficulties in the event of an economic downturn, they will undoubtedly continue to shop and purchase items on the site. , even if they’re cheaper.
Thanks to Etsy’s logo recognition, demonstrated ability to drive traffic to the site, and cash flow generation, investors deserve to seriously buy stocks when the overall market goes down.
Lawrence Rothman, CFA has a position in any of the above securities. The Motley Fool holds positions and recommends Etsy. The Motley Fool has a disclosure policy.
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