On Oct. 17, online auctioneer eBay (NASDAQ:EBAY) released third-quarter earnings for the period ended Sept. 30.

  • For more color to the numbers, read our earnings Take.
  • eBay took a $1.39 billion goodwill impairment charge this quarter, to account for the failure of the Skype acquisition to add the value it was expected to. Without that non-cash item, earnings would have landed at $455.3 million, or $0.34 per share, for a 24.1% net margin.
  • That charge isn't all bad. It doesn't hurt cash flow figures at all. But it's a before-tax item that helped reduce the tax load this quarter by 14 percentage points.
  • All three reportable segments grew sales over last year -- including Skype, which nearly doubled its sales and generated a profit if you ignore the impairment charge.
  • Today's price-to-earnings ratio started out at 317 times GAAP earnings, or 33.4 times a pro forma earnings figure.

(Figures in millions, except per-share data)

Income Statement Highlights

Q3 2007

Q3 2006

Change

Sales

$1,889.2

$1,448.6

30.4%

Net Profit

($935.6)

$280.9

N/A

EPS

($0.69)

$0.20

N/A

Diluted Shares

1,354.8

1,426.1

(5%)

Get back to basics with the income statement.

Margin Checkup

Q3 2007

Q3 2006

Change*

Gross Margin

76.4%

78.2%

(1.9)

Operating Margin

(49.6%)

23.4%

(73.0)

Net Margin

(49.5%)

19.4%

(68.9)
*Expressed in percentage points.

Margins are the earnings engine.

Balance Sheet Highlights

Assets

Q3 2007

Q3 2006

Change

Cash + ST Invest.

$3,988.7

$3,223.9

23.7%

Accounts Rec.

$411.2

$673.8

(39%)

Liabilities

Q3 2007

Q3 2006

Change

Accounts Payable

$98.7

$122.3

(19.3%)

Long-Term Debt

$0.0

$0.0

N/A

The balance sheet reflects the company's health.

Cash Flow Highlights

Q3 2007

Q3 2006

Change

Cash From Ops.

$629.5

$522.1

20.6%

Capital Expenditures

$119.3

$136.9

(12.8%)

Free Cash Flow

$510.2

$385.2

32.4%

Owner Earnings

$487.7

$279.3

74.7%

Free cash flow is a Fool's best friend.

Competitive Context

Company

Market Cap (in Millions)

Trailing P/E Ratio

CAPS Rating (Out of 5)

Google (NASDAQ:GOOG)

$192,275.3

50.1

**

eBay

$55,153.2

316.7*

***

Amazon.com (NASDAQ:AMZN)

$37,433.3

123.3

**

Yahoo! (NASDAQ:YHOO)

$35,956.2

55.6*

**

ValueClick (NASDAQ:VCLK)

$2,499.3

33.0

*****

Overstock.com (NASDAQ:OSTK)

$701.7

N/A

*

Source: Capital IQ (a division of Standard & Poor's) except when noted.
*Calculated to include latest quarter.

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