eBay Inc. (EBAY)

The methods disagree: one places the value today above the price ($120) and the other below.

Today — fairly valued: at $120 trades ~19.1% below its value discounted to today (~$149); the discount is positive but does not reach the margin of safety we require (≥38%).

At 5 years — En valor: the target price ($185) plus dividends yield between the 4% floor and the 10% average return — a reasonable return, though without the margin of a great investment.

The bridge: the return at 5 years exceeds the risk-free rate (4.5%) — but the discount does not reach the required margin of safety (≥38%). To require a 15% annual return, it would need to be bought at ~$92.

Educational / informational. Does not constitute investment advice.

The inverse approach: instead of projecting growth to obtain the value, the market price ($120) is taken as given and it solves for what annual owner-earnings growth would need to hold for 5 years for the present value —at the method's rate (4.5%, no-growth terminal)— to equal that price. It is the disconfirmation test: the expectations the price already pays for, contrasted against the method's projection.

The price discounts growth (11.2%/year) above our base case (7.0%/year) → it is priced for a demanding scenario and leaves little cushion against a slowdown.

That growth implies ~$2.7 bn of owner earnings in year 5 (vs ~$2.2 bn of our base case). It recalculates if the DCF assumptions are edited.

Year-by-year projection of the selected scenario. From each year, two versions of the flow are derived: growth FCF (operating flow − total capex, the cash surplus) and maintenance FCF (the owner earnings: what the business yields if it only sustains its capacity). Cash accumulates the retained surplus —what is not returned as dividend or buyback—, so that EV falls and multiples compress going forward. The valuation is done on EV/NOPAT. In edit mode, revenue, margins, capex, and exit multiples can be adjusted.

Year 0 is the TTM closed June 30, 2026 (revenue US$12.008 billion), on the rolling TTM→+5y grid. The starting point of the revenue path does not come from the three-year historical trajectory (which shows a marked acceleration: +3.2% FY23, +1.7% FY24, +7.9% FY25, +14.7% in the TTM) but from the guidance the company itself published in the 8-K on Aug 5, 2026 for the third quarter of 2026: revenue of US$3.07-3.12 billion with FX-neutral growth of 8-10% year over year, and GMV of US$22.0-22.4 billion with FX-neutral growth of 10-12%, guidance that already incorporates the impact of the Depop acquisition (closed July 30, 2026 for US$1.4 billion in cash). Year 1 of the base model starts at 10% (the high end of the FX-neutral guidance, plus a modest currency tailwind consistent with the recent pattern of reported growth running above FX-neutral) and decays smoothly to 5.5% by year 5, a rate consistent with a mature marketplace with active-buyer growth nearly flat (1-2% year over year) but with first-party advertising (+22-25% year over year, ~18% of 2025 revenue) gaining weight in the mix and sustaining the take rate (13.77% to 13.94% year over year). The GAAP operating margin starts from the TTM's 20.6% (depressed in 2025 by US$91 million of restructuring and US$61 million of legal accruals, both declared non-recurring) and gradually converges to 23.3% by year 5 on the mix shift toward higher-margin advertising, without reaching the current non-GAAP margin (28.5% in the second quarter of 2026), which excludes stock-based compensation, amortization of acquired intangibles, and the transaction costs tied to GameStop's unsolicited proposal. Stock-based compensation is material against cash flow (26.5% of TTM FCF, only 5.4% of revenue — the TSLA pattern), so the operating cash margin (ocfMargin) is stated net of that compensation: the raw TTM margin is 25.3% of revenue and net of stock-based compensation it is 19.9%, and that same ~5.3-percentage-point deduction is carried through the projected path. The valuation metric (EV/NOPAT on GAAP operating income) already expenses stock-based compensation because it is included in reported operating expense, so no further adjustment is required. Net buybacks are material (~5.5% annual reduction in diluted shares, sustained since FY22: 558M→533M→501M→468M→455M) and are modeled with a single share path across all three scenarios (bear/base/bull), consistent with the method: capital-return policy does not vary by scenario, only the business does. The surplus does not accumulate as cash: real TTM free cash flow (US$2.428 billion) is less than what is returned to shareholders (buybacks US$2.070 billion + dividends US$0.540 billion = US$2.610 billion), so the capital-allocation cascade produces negative retention by construction, with no need to declare reinvestment of a surplus. Declared corporate risk: in May 2026 GameStop submitted a non-binding proposal to acquire eBay at US$125 per share (a combination of cash and stock), rejected by eBay's board of directors; GameStop already owns approximately 10% of the shares and was weighing taking the offer directly to shareholders, with no vote date announced as of Jul 20, 2026. This record's valuation is standalone and incorporates no control premium; the corporate uncertainty is declared as a risk, not as an adjustment to the multiple or the target price.

Today's elevated multiple is the price of growth: if the business grows, the entry point cheapens on its own going forward (the metric grows while EV stays roughly flat). The exit multiple at 3 years is higher than the terminal at 5 years —at 3 years there is more growth still ahead—, so the value curve shows whether value creation is concentrated in the early or the later years. The required return is applied to the base scenario.

They are valued separately, with their own rationale, and are not incorporated into the base or the verdict (they are excess return). When assigning them value — in Editmode —, the total with optionalities updates live, without moving the base.

The verdict, the base CAGR, and the margin of safety are always calculated on the base; optionalities do not alter them (with optionalities at $0 they do not move).

Each card fixes a required annual return and answers: if the business is worth $185 in 5 years, what is the maximum that can be paid today to obtain that return? Since it now trades at $120, the margin of safety is how much cheaper the market is than that maximum. The three thresholds: 4% covers inflation (the floor), 10% is the long-term average return, and 15% is the level of a great investment.

With a target price of $185 in 5 years and a required return of 4.5% annually, the maximum to pay today is $149. Against the current market price ($120), the margin of safety is 19.1% (trades below the maximum → there is margin) and the total return at that price would be 9.0% annually.

• Entry multiple. The record derives today's entry multiple against the model; see the forward multiples row
• Exit multiple vs. band. 27× within the marketplace archetype band (18-25x), in the mid-to-low zone due to the narrow moat
• Margin of safety. It trades close to intrinsic value, far from the required margin of safety.
• Total expected return. Expected annual return of +9% over 5 years at the market price
• Dividend yield. US$0.31 per share declared quarterly, with a growth track record
• No extreme punishment. No panic-driven discount
• Corporate noise in the price. GameStop's proposal may be distorting the price in either direction; the valuation is standalone
• Consistency across lenses. The multiples approach anchors the verdict; the DCF runs as a second lens at the risk-free rate with a floor

Each margin over sales, year by year: historical (solid line) → projection (dotted).

• ✓ ROIC exceeds the cost of capital (~10%)
• ! CFROIC backs up the ROIC (74%, cash vs. accruals)
• ✓ Healthy balance sheet (low corporate debt)
• ✓ Durable competitive moat (multiple advantages)

• Cash generation. TTM free cash flow of US$2,428 million, consistent year over year
• Return on capital. Well above the 10% bar on a small invested capital base (asset-light business)
• Reinvestment runway. Modest capex (~5% of revenue); growth is financed more by product mix than by capital
• Earnings quality. GAAP depressed by declared 2025 one-offs (restructuring + legal); non-GAAP is more representative of the recurring business
• Stock-based compensation. Material against cash flow (26.5% of TTM FCF), expensed in the valuation metric (EV/NOPAT)
• Cash conversion. Real free cash flow is lower than what is returned to shareholders (buybacks + dividends), with no excess cash accumulation
• Margin stability. Recovering from the 2025 compression toward the structural 28-29% non-GAAP margin

Annual levels from the official filing (10-K); the % over each bar is the year-over-year (YoY) growth vs the prior year.

The primary driver is GMV x take rate (net revenue ÷ GMV). The take rate rises on the mix shift toward first-party advertising, which grows much faster (+22-25% year over year) than Marketplace commissions (+5%). eBay is transactional and spot-based (it does not report backlog or RPO): the RPO/backlog method does not apply to this business.

The % are the annual (year-over-year) growth: each year —historical and projected— vs the prior one; the TTM (trailing 12m) vs the TTM of a year ago, to avoid overlapping windows. The historicals are exact figures from the official filings; the projected years come from the year-by-year model (the intermediate years without their own series are interpolated between the anchors). The projected columns (+1y…+5y) are 12-month windows counted from the TTM close (30-jun-2026): the projection starts from the most recently reported data, not the fiscal year. The projected base is realistic and unbiased — the risk discount is applied at the end, via the required return. The rationale for each metric is in the (i).

• Revenue growth. TTM +14.7% year over year, guided to +8-10% FX-neutral for Q3 2026, with Depop already included
• GMV growth. +15% year over year reported in the second quarter of 2026, +14% FX-neutral
• Active buyers. Nearly flat (+1-2% year over year): growth is not coming from net new-user acquisition
• First-party advertising. +22-25% year over year, the main driver of the take rate and the margin mix
• Geographic growth, U.S. vs. international. U.S. accelerating sharply (+24% year over year); international much slower (+6%) and exposed to de minimis risk
• Complementary M&A. Depop (US$1.4bn, closed Jul-2026) and Tise (Oct-2025) expand categories without leveraging the balance sheet
• Penetration ceiling. GMV of nearly US$80,000 million is already a large base; future growth depends more on mix than on gross volume

• Business model. Pure intermediation, no owned inventory, capital-light
• Revenue recurrence. Stable/rising take rate on recurring GMV from repeat buyers
• Pricing power. The take rate rises through mix shift toward advertising, not by aggressively raising seller commissions
• Barriers to entry. The 10-K itself admits they are low: anyone can launch a marketplace with commercial software
• Geographic diversification. 44-51% of GMV is international, exposed to de minimis risk
• Cyclicality. Depends on discretionary consumer spending; sensitive to tariffs and macro conditions
• Competitive position. Smaller and less resourced than Amazon, Alibaba, Google, Meta, and Apple, per the filing itself

Not all debt is equal: only the structural needs refinancing; the rest is operational (self-liquidating).

Structural debt is what is exposed to the contraction phase of the cycle; operational debt (leases, matched funding) self-liquidates with the business.

• ✓Leverage (net debt / EBITDA)Net debt / EBITDA 0.9x
• ✓Interest coverage (EBIT / interest)9.8x
• –Liquidity (current ratio)no data
• !Cash quality (CFROIC vs ROIC)CFROIC backs 74% of ROIC
• ✓Value creation (ROIC − 10% bar)+16pp
• ✓Malinvestment test (capex vs incremental ROIC)Capex/D&A 1.3x
• !Float / working capitalConsumes cash $0.7 bn (positive WC)
• !Dilution (SBC % of revenue + shares)SBC 5.4% of revenue

A traffic-light interpreted by the method (not generic): float (negative WC) adds up, capex is judged by incremental ROIC (malinvestment test), and a lender is not subjected to corporate solvency. The (i) shows the derivation of each number.

• Leverage. Gross debt ~US$6.0bn against cash and short-term equivalents ~US$3.3bn (net debt ~US$2.7bn), moderate relative to cash flow
• Current liquidity. Current assets US$6,003M against current liabilities US$5,892M as of June 30, 2026
• Debt maturities. Repaid US$750M of senior notes in the second quarter of 2026 without refinancing with additional long-term debt
• Operating cash generation. TTM operating cash flow of US$3,036 million, funding buybacks, dividends, and capex without straining the balance sheet
• Corporate transaction costs. US$38 million in the first half of 2026 tied to GameStop's proposal and shareholder activism
• Stock-based compensation and dilution. Material SBC (5.4% of revenue) but more than offset by sustained net buybacks (~5.5% annually)

How cash comes in and how it is deployed. In green, the business's own cash (the owner-FCF it generates and reinvests); in gray, the float and credit — customer and funding money, which is not the shareholder's.

Most of the capital goes to share buybacks (~59% of capital deployed, funded with real cash flow and not debt), followed by reinvestment in technology and infrastructure capex (~17%), cash dividends (~15%, growing and declared quarterly), and complementary acquisitions such as Depop and Tise (~9%). Shareholder returns (buybacks + dividends, ~74% of capital deployed) exceed real free cash flow, so cash does not accumulate: the company returns essentially everything it generates.

Who owns the shares — the alignment and whether there is a controlling shareholder.

• Capital allocation. Sustained buybacks funded with real cash flow, with no additional net leverage
• Alignment. No controlling shareholder or founding family; modest CEO ownership (~0.34%)
• Response to GameStop's proposal. The board rejected the non-binding offer instead of negotiating immediately, citing long-term value
• Operating execution. Met and raised guidance in the second quarter of 2026 despite the corporate distraction
• Cost discipline. 2025 restructuring (US$91M) sought efficiency; non-GAAP margin has held stable at 28-29%

• Missing buyers: GameStop's unsolicited proposal introduces corporate uncertainty (no definitive agreement or vote date) that may keep long-term investors on the sidelines until it is resolved
• Missing buyers: the recent growth in first-party advertising (+22-25% year over year) is not yet fully reflected in the multiple, possibly because traditional Marketplace (82% of revenue) is still growing only in the low single digits
• Motivated sellers: the 2025 one-offs (US$91M restructuring + US$61M legal accruals) depressed the reported GAAP operating margin (20.5%) versus non-GAAP (28.9%), which can bias downward a reader who looks only at GAAP without normalizing

There is no extreme, panic-driven discount. The margin of safety comes mainly from the high return on capital and the mix improvement toward advertising, not from a dramatic discount source. GameStop's proposal adds short-term corporate noise that the market may be pricing imprecisely in either direction (as risk that it won't materialize, or as speculation that it will).

The annual return (CAGR at 5 years) in each scenario, with the total period return below — the margin of safety made visual: upside range wide, downside range narrow.

Even in the bear scenario, the return holds at -6%/year (-26% total): the margin of safety protects the downside. The bull (+19%/year, +135% total) exceeds it comfortably — a favorable asymmetry, with a narrow downside range and a wide upside range.

• De minimis regime. Eliminated in the U.S. since 2025 and in the EU from Jul-2026; threatens cross-border commerce (44-51% of GMV)
• Scale competition. Amazon, Alibaba, Google, Meta, and Apple cited by the 10-K itself as larger, better-resourced rivals
• Discretionary consumer spending. Sensitive to inflation, tariffs, and volatile macroeconomic conditions
• GameStop's proposal. Corporate uncertainty with no definitive agreement or vote date; sustained transaction costs
• Generative AI in discovery. Risk that chatbots and AI assistants divert consumer traffic to other platforms
• Cybersecurity. Material data breach in 2014 (up to 145 million users); failed attempted attack using AI-generated voice impersonating the CEO

Each thinker's analytical framework applied to our data.

• Buffett / Graham Quality + margin of safety

  A narrow moat and ROIC 26% above the 10% bar, but the margin is limited (+19%) → excellent business at a fair price.

• Peter Lynch Growth at a reasonable price (GARP)

  A stalwart growing 7% at a multiple/growth of 3.8 → expensive for its growth.

• Joel Greenblatt Cheap and high-return (Magic Formula)

  Earnings yield 4% (EBIT/EV) + ROIC 26% → falls outside the Magic Formula.

• Howard Marks Perception vs reality + cycle

  The price discounts 11% vs our 7%: priced for perfection, no favorable mispricing.

• Seth Klarman Capital protection (bear scenario)

  Bear-scenario floor -5%/yr, bull-scenario ceiling +19%/yr over 5y: reasonable asymmetry, without an ample cushion.

• Pat Dorsey Moat strength (Five Rules)

  A narrow moat, stable; sources: network effects, cost advantage, intangibles, switching costs, efficient scale → partially passes the Five Rules.

• Aswath Damodaran Expectations implied by the price

  The price implies 11% vs our 7%: coherent, but at the optimistic end of the range.