Which investment is better?

Two e-commerce giants, Etsy and eBay, are intriguing options for investors… but which is better? Both companies have seen sales skyrocket during the pandemic. In 2023, that excitement has faded and consumer patterns have changed, slowing the growth companies have seen over the past few years.

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Despite this, Etsy and eBay still promise investments depending on the type of investor you are.

Better for growth investors: Etsy

Etsy is a more attractive option for those who prioritize growing their investments. While eBay sales rose 5% in the third quarter, Etsy outpaced it with 7% growth. Etsy is also expanding its customer base, increasing its pool of buyers by 4% to an impressive 92 million. On the other hand, eBay saw a slight decline in customers of 1%.

Etsy’s growth includes other revenue streams, such as advertising fees and payment processing. Wall Street analysts expect Etsy to grow at a rate of 7% this fiscal year, while eBay will grow at about 3%.

Better for low-risk investors: eBay

The growth is huge, but it must eventually translate into profits. This is where eBay outshines Etsy, boasting a profit conversion rate of over 20% of its revenue compared to Etsy’s 14%. eBay’s impressive free cash flow of $3 billion, or more than 30% of sales, is further proof of its financial strength. Etsy’s free cash flow is lower as the company prioritizes reinvesting in growth.

Quotation

eBay’s stock trades at twice revenue, while Etsy’s valuation is higher at 3.6 times sales. For investors looking for growth, Etsy’s potential to grow its sales base of just under $3 billion is enticing. eBay, on the other hand, appeals to those looking for stability, due to its wide global presence, strong profits, cash flow, and 2% dividend yield.

Application

While both e-commerce companies are good investment options, one may be better for you. If you are an investor interested in the growth potential of your business, Etsy is a good choice. On the other hand, if you are an investor looking to minimize risk and increase cash flow, eBay has an excellent track record and a 2% dividend.

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This article originally appeared on GOBankingRates.com: eBay or Etsy Stock: Which is a Better Investment?