The metaverse has been garnering lots of attention from investors recently. Meta Platforms (META 0.11%) is primarily a social media company right now but has indicated ambitious goals of becoming a leader in the metaverse. In comparison, Roblox (RBLX -1.18%) is a metaverse company at its core.  

Let's take a deep dive into each of these companies to determine which could be the better buy for investors in 2022. 

A person looking at their phone.

Image source: Getty Images.

Meta Platforms

Calling Meta Platforms' plans for the metaverse ambitious is probably an understatement. CEO Mark Zuckerberg has stated the company's goal of helping 1 billion people become part of the metaverse by the end of the decade. To prove he is not just talking, Meta has spent $10 billion this year building the foundations for its platform. What's more, it said it would likely spend even more than that in the upcoming years as it continues the work.

Of course, attracting 1 billion users to its metaverse platform could be a potentially lucrative opportunity. This can be inferred by Meta's willingness to spend billions of dollars building out the platform. Already, Meta Platforms boasts more than 3.5 billion monthly active users across its family of social media apps. It makes money from these users by making arrangements with marketers, allowing them to show ads to the users.

In 2018, 2019, and 2020, Meta has earned $55.8 billion, $70.7 billion, and $86 billion in revenue, respectively, primarily by displaying advertisements. It did this while funneling a healthy part of that into profits. Indeed, its operating profit margin in those years was 44.6%, 33.9%, and 38%, respectively.

Roblox 

Roblox is one of the pioneers of the metaverse. Its platform is home to 47.3 million daily active users who interact with each other and the environment virtually. Roblox's site is free to join and engage with. It makes money by selling an in-game currency called Robux. Players who want to experience or purchase exclusive things need to buy Robux.

Interestingly, Roblox does not create these unique items or experiences itself. It has third-party developers take on the risk of time and resources to build them out, and if they are successful, Roblox shares a percentage of the revenue the creations earn. That model has worked reasonably well for Roblox; revenue has grown from $325 million in 2018 to $508 million in 2019, and $924 million in 2020. However, unlike Meta, Roblox has generated a total of over $400 million in losses in operating income during that time.

That being said, Roblox has increased cash from operations from $99 million in 2019 to $524 million in 2020.

The verdict

FB Price to Free Cash Flow Chart

FB Price to Free Cash Flow data by YCharts

Looking at the price-to-sales ratio and price-to-free cash flow ratio for each company, it's clear that Roblox is selling at a premium to Meta (see chart). On both metrics, Roblox is about three times as expensive. In my opinion, that's too high a premium to pay for Roblox, even though it is growing revenue and cash from operations at faster rates than Meta. 

Meta Platforms and Roblox are both excellent businesses, but if you had to pick only one stock for 2022, it should be Meta Platforms.