Meta Platforms Inc. Reports Strong Q4 Results and Dividend, Raises Questions of Value Stock Status

Shares of Meta Platforms Inc., previously known as Facebook, surged after the company announced stellar fourth-quarter results and the introduction of a dividend. As investors celebrated the 25% increase in revenue and a three-fold growth in profits compared to the previous year, the question arises whether Meta should be considered a value stock.

Value stocks are traditionally associated with mature companies that deliver consistent performance, offer dividends to shareholders, and trade at relatively low valuations compared to the overall market. With Meta’s significant growth and positive financials, investors saw an opportunity in the stock which had been priced as a bargain until Thursday’s closing price.

Looking ahead, let’s analyze Meta’s forward price-to-earnings (P/E) ratio. Considering Meta’s Friday closing price, which witnessed a 20% surge, and consensus estimates for the company’s earnings per share (EPS) for the coming 12 months, Meta falls in the category of the “Magnificent Seven.” This group includes other heavyweight U.S. companies like Microsoft, Apple, Amazon.com, Alphabet, Nvidia, and Tesla, who played a substantial role in driving the S&P 500 rally in 2023.”

Table: Forward P/E Ratios for the Magnificent Seven and Others

Meta Platforms Inc. stands as the second-cheapest among the top 10 companies in the S&P 500, based on forward P/E ratios. Interestingly, despite Meta’s forward P/E of 24 being higher than its five-year average, it still remains below its 10-year average. The majority of the stocks in this group trade above their five-year averages, and a significant number also surpass their 10-year averages. The S&P 500 index’s forward P/E is higher than both of its averages in this context.

Continuing the analysis, we shift our focus to the compound annual growth rates (CAGR) for sales, EPS, and free cash flow per share within this group. This evaluation is based on consensus estimates among analysts polled by FactSet for the years up to 2025.

Table: Estimated CAGR for Sales, EPS, and FCF

Meta Platforms Inc. demonstrates a 2-year estimated CAGR of 14.3% for sales per share, 24.1% for EPS, and 11.2% for free cash flow per share. Among the other notable companies in this group, Nvidia stands out with the highest CAGRs, while Microsoft and Alphabet also show significant growth rates across the board.

While Meta’s forward P/E suggests it may not fit the traditional value stock criteria, it still stands as one of the more attractively valued stocks within the top 10 companies in the S&P 500. With persistent growth and strong financials, Meta has proven to be an appealing investment for many. However, market conditions and future developments will ultimately determine whether Meta’s stock can continue to be classified as a value stock.