Over the last six months, Pinterestโs shares have sunk to $26.96, producing a disappointing 18.6% loss - a stark contrast to the S&P 500โs 14.1% gain. This may have investors wondering how to approach the situation.
Following the pullback, is now the time to buy PINS? Find out in our full research report, itโs free for active Edge members.
Why Is Pinterest a Good Business?
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, Pinterestโs monthly active users, a key performance metric for the company, increased by 11.2% annually to 600 million in the latest quarter. This growth rate is strong for a consumer internet business and indicates people love using its offerings. 
2. EBITDA Margin Reveals a Well-Run Organization
Operating income is often evaluated to assess a companyโs underlying profitability. In a similar vein, EBITDA is used to analyze consumer internet companies because it excludes various one-time or non-cash expenses (depreciation), providing a clearer view of the businessโs profit potential.
Pinterest has been a well-oiled machine over the last two years. It demonstrated elite profitability for a consumer internet business, boasting an average EBITDA margin of 28.3%. This result isnโt surprising as its high gross margin gives it a favorable starting point.
3. Excellent Free Cash Flow Margin Boosts Reinvestment Potential
If youโve 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 canโt 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 companyโs free cash flow margin was among the best in the consumer internet sector, averaging 27.4% over the last two years.
Final Judgment
These are just a few reasons Pinterest is a rock-solid business worth owning. With the recent decline, the stock trades at 13.4ร forward EV/EBITDA (or $26.96 per share). Is now the time to initiate a position? See for yourself in our full research report, itโs free for active Edge members.
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