Pinterest’s 21.7% return over the past six months has outpaced the S&P 500 by 9.9%, and its stock price has climbed to $21.27 per share. This was partly thanks to its solid quarterly results, and the performance may have investors wondering how to approach the situation.
Is it too late to buy PINS? Find out in our full research report, it’s free.
Why Are We Positive on Pinterest?
Created with the idea of virtually replacing paper catalogues, Pinterest (NYSE: PINS) is an online image and social discovery platform.
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% annually to 640 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
Analyzing the long-term change in earnings per share (EPS) shows whether a company’s incremental sales were profitable — for example, revenue could be inflated through excessive spending on advertising and promotions.
Pinterest’s EPS grew at 36.4% compounded annual growth rate over the last three years, higher than its 16.6% 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
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
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 27.5% over the last two years.
Final Judgment
These are just a few reasons why we think Pinterest is a great business, and with its shares beating the market recently, the stock trades at 15.9× forward EV/EBITDA (or $21.27 per share). Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
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