Shareholders of Pinterest would probably like to forget the past six months even happened. The stock dropped 43.4% and now trades at $18.12. This was partly due to its softer quarterly results and might have investors contemplating their next move.
Given the weaker price action, is this a buying opportunity for PINS? Find out in our full research report, it’s free.
Why Do Investors Watch PINS Stock?
Created with the idea of virtually replacing paper catalogues, Pinterest (NYSE: PINS) is an online image and social discovery platform.
Three Positive Attributes:
1. Monthly Active Users Skyrocket, Fueling Growth Opportunities
As a social network, Pinterest generates revenue growth by increasing its user base and charging advertisers more for the ads each user is shown.
Over the last two years, Pinterest’s monthly active users, a key performance metric for the company, increased by 11.4% annually to 619 million in the latest quarter. This growth rate is strong for a consumer internet business and indicates people love using its offerings.
2. Outstanding Long-Term EPS Growth
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Pinterest’s EPS grew at 38.2% compounded annual growth rate over the last three years, higher than its 14.6% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
3. Excellent Free Cash Flow Margin Boosts Reinvestment Potential
Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
Pinterest has shown terrific cash profitability, driven by its lucrative business model and cost-effective customer acquisition strategy that enable it to stay ahead of the competition through investments in new products rather than sales and marketing. The company’s free cash flow margin was among the best in the consumer internet sector, averaging 27.9% over the last two years.
Final Judgment
Pinterest possesses several positive attributes. After the recent drawdown, the stock trades at 7.3× forward EV/EBITDA (or $18.12 per share). Is now the right time to buy? See for yourself in our in-depth research report, it’s free.
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