Over the last six months, Robinhood’s shares have sunk to $99.15, producing a disappointing 6.8% loss - a stark contrast to the S&P 500’s 10% gain. This may have investors wondering how to approach the situation.
Given the weaker price action, is now a good time to buy HOOD? Find out in our full research report, it’s free.
Why Is HOOD a Good Business?
With a mission to democratize finance, Robinhood (NASDAQ: HOOD) is an online consumer finance platform known for its commission-free stock and crypto trading.
1. Eye-Popping Growth in Customer Spending
Average revenue per user (ARPU) is a critical metric to track because it measures how much the company earns in fees from each user. ARPU also gives us unique insights into the average transaction size on Robinhood’s platform and the company’s take rate, or "cut", on each transaction.
Robinhood’s ARPU growth has been exceptional over the last two years, averaging 47.7%. Its ability to increase monetization while growing its funded customers demonstrates its platform’s value, as its users are spending significantly more than last year. 
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.
Robinhood’s full-year EPS flipped from negative to positive over the last three years. This is a good sign and shows it’s at an inflection point.
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.
Robinhood 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 an eye-popping 49.6% over the last two years.
Final Judgment
These are just a few reasons why we're bullish on Robinhood. After the recent drawdown, the stock trades at 28.3× forward EV/EBITDA (or $99.15 per share). Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
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