What a brutal six months it’s been for Robinhood. The stock has dropped 26.4% and now trades at $75.72, rattling many shareholders. This was partly due to its softer quarterly results and may have investors wondering how to approach the situation.

Following the drawdown, is now the time to buy HOOD? Find out in our full research report, it’s free.

Why Are We Positive On Robinhood?

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 198%. Its ability to increase monetization demonstrates its platform’s value for existing users.

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. Increasing Free Cash Flow Margin Juices Financials

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.

As you can see below, Robinhood’s margin expanded meaningfully over the last few years. This is encouraging, and we can see it became a less capital-intensive business because its free cash flow profitability rose more than its operating profitability. Robinhood’s free cash flow margin for the trailing 12 months was 35.4%.

Final Judgment

These are just a few reasons why Robinhood is a cream-of-the-crop consumer internet company. With the recent decline, the stock trades at 23.1× forward EV/EBITDA (or $75.72 per share). Is now a good time to initiate a position? See for yourself in our in-depth research report, it’s free.

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