In the months after eBay (EBAY 0.61%) formally spun off PayPal (PYPL 1.96%) late last year, it appeared as though the online marketplace had made a great move to allow both companies to better focus on building their respective core businesses.

But if you have to choose, which of those businesses is the better buy today?

IMAGE SOURCES: PayPal Holdings/eBay, Inc.

The case for eBay

To start, eBay handily exceeded expectations with its first post-separation earnings report a year ago, with CEO Devin Wenig lauding "progress on executing our strategy to reposition the company to deliver stable and profitable long-term growth."

Fast-forward to its most recent report, however, and you'll see eBay stock tumbled even though its third-quarter 2016 results arrived above expectations (revenue climbed a modest 5.7% year over year, to $2.22 billion, while adjusted earnings per share rose 4.7%, to $0.45). The problem was that those results were followed with disappointing guidance.

More specifically, eBay management told investors to expect revenue in the crucial holiday period to be in the range of $2.36 billion to $2.41 billion, good for currency-neutral growth of 4% to 6% over the same year-ago period, which should translate to adjusted earnings per share of $0.52 to $0.54. But Wall Street was already modeling revenue and earnings near the high ends of those respective guidance ranges.

eBay also pointed to the root causes of its shortfall as a combination of stubborn foreign-exchange headwinds and faster-than-expected growth from event-ticket specialist StubHub, sales from which tend to command lower margins than eBay's core marketplaces business. And that's fair enough; currency headwinds will come and go, and it's an enviable problem to have a fast-growing subsidiary supplementing overall growth, even if it's not as profitable as the core business.

But most exciting is that eBay management also noted that its marketplace platform has begun to see "green shoots" from its ambitious replatforming efforts -- that is, as eBay chief technology officer Steve Fisher put it, the company's "multi-year evolution of our shopping platform at eBay that aims to deliver relevant, persistent, and personalized experiences for customers."

As it stands, however, these green shoots haven't started to materially affect eBay's business yet. But when that does happen, and with shares trading at a reasonable 17.7 times trailing-12-month earnings, expect the market to take note and drive shares up accordingly.

The case for PayPal

Meanwhile, PayPal stock jumped more than 10% the day after its own quarterly report last month, namely as revenue last quarter (up 18% year over year, to $2.67 billion) beat expectations, while adjusted net income (up 13%, to $425 million, and up 14% on a per-share basis, to $0.35) was in line with estimates. 

PayPal also issued encouraging guidance for the current quarter and then increased the bottom ends of its full-year outlook to call for 2016 revenue of $10.78 billion to $10.85 billion, and adjusted earnings per share of $1.48 to $1.50. But arguably most important was that PayPal told investors its adjusted operating margin is expected to be stable to modestly higher over the next three years, effectively removing worries over the possible negative repercussions on margins stemming from its recently expanded partnership with MasterCard.

Under that partnership, PayPal has agreed to make MasterCard a "clear payment option" within its payments platform, in contrast to its previous preference for encouraging users to instead link bank accounts via automatic clearing house (ACH). PayPal will also enable Masterpass as a payment option for Braintree merchants. Because ACH transfers are cheaper for PayPal to facilitate than credit card transactions, investors were particularly happy to hear that this agreement won't drag down its profitability.

In exchange, PayPal is set to enjoy "certain financial volume incentives" through fees incurred from the deal, is no longer subject to MasterCard's digital-wallet operator fee, and gets to utilize tokenization services that will offer it an increased presence point of sale through more than 5 million contactless-enabled merchant locations globally. 

The verdict

So that leaves us in an interesting place. On one hand there's eBay, the slower-growing online marketplace that aims to accelerate its business as its re-platforming efforts begin to yield fruit. And on the other hand, PayPal, a faster-growing digital payments specialist with a bright future -- and, to be fair, a stock that's priced accordingly trading at around 35 times trailing-12-month earnings.

Even so -- and with the caveat that I'd be comfortable owning either eBay or PayPal stock in my own portfolio -- I'm a firm proponent of the idea that winners keep on winning, and I don't want to underestimate PayPal's ability to continue growing into what appears to be a rich valuation. So in the end, I think PayPal is the better buy today.