Finding and investing in companies with a proven and stable track record of growth is very difficult especially with startups. We select companies based on three criteria: innovation, earnings per share growth, and risk management. We believe that the best companies are leaders in these areas. How companies manage these areas over time determines how much or how large your investment can grow.
Pinterest Inc. PINS came to mind this week as a company that may do well over the long-term. The company reported better than expected earnings of .12 per share versus .08 per share, up 44% and higher revenues of $399.90 million versus expected $368.93 million, up 8.39%. This is impressive because the company just went public last year on April 18, 2019. In less than one year the company has evolved from test case into a real company that is growing market share and making money.
The stock is undervalued based on valuation metrics which suggests a fair value price of $35 per share. The stock closed at on $25.20 Friday February 9, 2020. The difference between the where the stock closed, and its fair value is approximately 24.5%. We believe that the company can easily close that gap because on the growth side the company provides users and marketers with an array of easy to use tools that facilitates taking ideas and concepts from just that to reality quickly and easily.
Although, Pinterest is not the only company that’s doing this; however they are at the forefront of providing the technology for users that’s growing revenues for the company. Secondly, the company is seeing surprisingly strong growth in the international market and management seems to have an intelligent grasp of the market and responds accordingly to the risks and uncertainty as the company grows. We think the company fits all three of our investment criteria and is a company to keep on your watch-list for future growth. Pinterest’s stock is just one of the stocks that we own in our portfolio.