eBay (NASDAQ:EBAY) and Overstock.com (NASDAQ:OSTK) are frequently overshadowed in the e-commerce market by Amazon.com (NASDAQ:AMZN). All three online retailers were founded in the 1990s, but Amazon shares surged 2,000% over the past decade as eBay and Overstock rose just 140% and 11%, respectively.

Image source: Getty Images.

Amazon remains a best-in-breed play in that market, but is either eBay or Overstock a good alternative play in e-commerce? Let's examine their core business models, growth trajectories, and valuations to decide.

What do eBay and Overstock do?

eBay popularized the online auction model. Unlike Amazon, which fulfills orders at big warehouses, eBay connects buyers to sellers, who pay fees to the site for listings and completed sales. eBay has since expanded its business with "Buy it Now" shopping, shopping by UPC, ISBN, and other codes (via Half.com), online classified ads, online event ticket trading, and other services. Online payments company PayPal (NASDAQ:PYPL) was eBay's subsidiary (and fastest growing unit) until 2015, when it was spun off in an IPO.

Overstock initially sold surplus and returned merchandise from other e-tailers, and liquidated inventories of failed dot-com companies at clearance prices. The company now manages the inventories of other e-tailers, sells handmade goods from workers in developing nations, and offers brand new merchandise. Overstock was notably the first major retailer to accept bitcoin in 2014, although critics claimed that it was just a publicity stunt. Overstock is also investing heavily in blockchain, the technology that powers bitcoin, to build its own cryptocurrency trading platform.

How fast are eBay and Overstock growing?

eBay has 165 million active buyers, 1 billion live listings, and has native sites in over 30 countries. However, the company has struggled to grow its revenue at a comparable rate as Amazon, which is expected to post 28% sales growth this year. eBay's revenues fell 2% annually, to $8.59 billion, in fiscal 2015 due to currency headwinds and regional competition.

Analysts expect eBay's revenue to rise 5% this year when it reports its full-year earnings on Jan. 25. eBay's non-GAAP earnings slipped 6%, to $2.23 billion, last year due to the aforementioned challenges, and analysts expect it to post just 3% growth this year. Looking ahead, eBay believes that a transition from "unstructured" to "structured" data -- which refines its listings for better search results and clearer suggestions -- will streamline its operations for both sellers and buyers. But that upgrade, which was introduced in mid-2015, is a sluggish one that hasn't generated many visible improvements yet.

eBay's mobile app. Image source: Google Play.

Overstock lists over 6 million products on its site and ships from the U.S. to over 180 countries worldwide. Overstock's answer to Amazon Prime is Club O, a two-tiered membership program that offers discounts, free shipping, and other perks for $20 a year (for the Gold tier).

Overstock's total revenue rose 11%, to $1.66 billion, in fiscal 2015, and analysts expect it to post 8% growth this year. On the bottom line, Overstock's net income fell 73%, to $2.4 million, in 2015 due to more aggressive promotions and higher sales, marketing, and tech expenses. But analysts expect Overstock's earnings per share to more than triple this year as those costs decline. These figures indicate that, while Overstock's margins are much thinner than eBay's, it's carved out a defensible niche in the closeout and discount market.

The valuations and the verdict

eBay currently trades at 19 times earnings, and Overstock has a trailing P/E of 45. This means that eBay trades at a discount to the specialty retail industry, which has a P/E of 44, while Overstock trades at a slight premium.

The choice between eBay and Overstock is a tough one. eBay has beefier margins and lower valuations, but its top- and bottom-line growth leave a lot to be desired. Overstock has better top- and bottom-line growth potential, but its paper-thin margins leave it more vulnerable to big market downturns than eBay. With the market hovering near historic highs, I'd rather own eBay over Overstock, but I'd consider buying the latter if its valuations cool down.