Facebook (FB), is the stock still worth buying?

I think there is no need to introduce Facebook. It is the largest social network in the world, with more than 1 billion active monthly users. Facebook, Inc. was founded in 2004 by Mark Zuckerberg, Eduardo Saverin, Andrew McCollum, Dustin Moskovitz and Chris Hughes and is headquartered in Menlo Park, California. On Facebook, users can post statuses, add friends, send messages, join groups, like posts or pages, play games and all other social stuff.

FB started with a bad IPO, after which the stock dropped almost 50%. However Facebook shares recovered and have been reaching all-time highs ever since.

Facebook financials and margins

Revenues have grown almost 10-fold in the past 5 years, while profits increased by 700%. Net income margin has gone down, but on the positive side, free cash flow shot up. For 2015, analyst are estimating EPS growth of 30% to 1.56 USD per share. For the next 5 years, Wall Street expects growth of 37%.

EPS estimates

Earnings estimate trend. Source: Zacks

Valuation

If I take the growth that analysts are expecting for the next 5 years, then take half of that for years 5-10 (18.5%) and assume a 2% discount rate, the Facebook's stock value is as follows:

Even after optimistic assumptions, FB stock doesn't offer that much upside. Of course a DCF valuation is only a rough guide, if Facebook can grow faster than everybody expects it's value is much higher. Compared to similar companies, only Twitter grew faster, Facebook is selling for P/S ratio of almost 20 and a 2015 forward P/E of 37.3.

So to summarize, Facebook looks reasonably valued at current levels and doesn't offer so much upside. Furthermore, the stock is sold heavily by insiders (almost 1 million shares in July alone) and the last buy was in August of 2012. It's a good company but I do not like the stock at these levels, so I decided not to buy it.

Facebook chart