Don't Take a Position in PINS Before Reading This!

Pinterest shares fell by -1.8% during the day's afternoon session, and are now trading at a price of $31.59. Is it time to buy the dip? To better answer that question, it's essential to check if the market is valuing the company's shares fairly in terms of its earnings and equity levels.

Pinterest's P/B and P/E Ratios Are Higher Than Average:

Pinterest, Inc. operates as a visual discovery engine in the United States and internationally. The company belongs to the Technology sector, which has an average price to earnings (P/E) ratio of 27.16 and an average price to book (P/B) ratio of 6.23. In contrast, Pinterest has a trailing 12 month P/E ratio of -98.7 and a P/B ratio of 7.58.

When we dividePinterest's P/E ratio by its expected five-year EPS growth rate, we obtain a PEG ratio of 0.77, which indicates that the market is undervaluing the company's projected growth (a PEG ratio of 1 indicates a fairly valued company). Your analysis of the stock shouldn't end here. Rather, a good PEG ratio should alert you that it may be worthwhile to take a closer look at the stock.

The Business Has Negative Margins on Average:

2019 2020 2021 2022 2023
Revenue (MM) $1,143 $1,693 $2,578 $2,803 $2,872
Gross Margins -122% -8% 13% -4% -13%
Operating Margins -119.0% -8.0% 13.0% -3.0% -11.0%
Net Margins -119.0% -8.0% 12.0% -3.0% -10.0%
Net Income (MM) -$1,361 -$128 $316 -$96 -$291
Free Cash Flow (MM) -$33 $11 $744 $440 $370
Capital Expenditures (MM) $34 $17 $9 $29 $12
Net Current Assets (MM) $1,698 $1,990 $2,683 $2,874 $2,432
Long Term Debt (MM) $127 $105 $161 $134 $118
LT Debt to Equity 0.06 0.05 0.05 0.04 0.04

Pinterest has healthy debt levels, growing revenues and decreasing reinvestment in the business, and a strong EPS growth trend. However, the firm suffers from slimmer gross margins than its peers and consistently negative margins with a positive growth rate. Finally, we note that Pinterest has irregular cash flows.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.