With a significant daily gain of 19.31%, a 3-month loss of -22.03%, and an Earnings Per Share (EPS) (EPS) of 3.1, Shutterstock (SSTK, Financial) is an intriguing case for investors. The question to be addressed is whether the stock is significantly undervalued. In this analysis, we will delve into the company's valuation, financial strength, profitability, and growth to provide a comprehensive understanding of Shutterstock's true worth. We invite you to join us on this insightful journey.
Company Introduction
Shutterstock Inc is a U.S.-based company specialized in digital content provision. It offers a range of products including photographs, illustrations, vector art, video clips, and music tracks, which are marketed under brands such as Shutterstock, Bigstock, Offset, Shutterstock Music, and Shutterstock Editorial. Shutterstock.com, the company's flagship brand, is the primary source of its sales. Its customers range from traditional enterprises to marketing agencies and media organizations, with North America and Europe jointly accounting for the majority of its revenue.
As of October 31, 2023, Shutterstock's stock price stands at $40.94, while the GF Value, an estimation of its fair value, is $86.13. This discrepancy suggests that the stock is significantly undervalued. In the following sections, we will delve deeper into Shutterstock's value, incorporating financial assessment with essential company details.
Understanding the GF Value
The GF Value represents the current intrinsic value of a stock derived from our exclusive method. The GF Value Line on our summary page provides an overview of the fair value that the stock should ideally be traded at. It is calculated based on three factors:
- Historical multiples (PE Ratio, PS Ratio, PB Ratio, and Price-to-Free-Cash-Flow) that the stock has traded at.
- GuruFocus adjustment factor based on the company's past returns and growth.
- Future estimates of the business performance.
According to GuruFocus Value calculation, Shutterstock (SSTK, Financial) appears to be significantly undervalued. At its current price of $40.94 per share and the market cap of $1.50 billion, Shutterstock stock appears to be significantly undervalued. This under-valuation suggests that the long-term return of its stock is likely to be much higher than its business growth.
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Financial Strength
Investing in companies with poor financial strength carries a higher risk of permanent loss of capital. Thus, it is crucial to carefully review the financial strength of a company before deciding whether to buy its stock. Looking at the cash-to-debt ratio and interest coverage is a great starting point for understanding the financial strength of a company. Shutterstock has a cash-to-debt ratio of 1.38, which is worse than 72.18% of 568 companies in the Interactive Media industry. However, GuruFocus ranks the overall financial strength of Shutterstock at 8 out of 10, indicating that the financial strength of Shutterstock is strong.
Profitability and Growth
Investing in profitable companies carries less risk, especially for companies that have demonstrated consistent profitability over the long term. Typically, a company with high profit margins offers better performance potential than a company with low profit margins. Shutterstock has been profitable for 10 years over the past 10 years. During the past 12 months, the company had revenues of $845.90 million and Earnings Per Share (EPS) of $3.1. Its operating margin of 12.3% is better than 68.95% of 583 companies in the Interactive Media industry. Overall, GuruFocus ranks Shutterstock's profitability as strong.
One of the most important factors in the valuation of a company is growth. Long-term stock performance is closely correlated with growth according to GuruFocus research. Companies that grow faster create more value for shareholders, especially if that growth is profitable. The average annual revenue growth of Shutterstock is 7.4%, which ranks worse than 50.77% of 518 companies in the Interactive Media industry. However, the 3-year average EBITDA growth is 30.7%, which ranks better than 73.2% of 388 companies in the Interactive Media industry.
ROIC vs WACC
Another method of determining the profitability of a company is to compare its return on invested capital to the weighted average cost of capital. Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. When the ROIC is higher than the WACC, it implies the company is creating value for shareholders. For the past 12 months, Shutterstock's return on invested capital is 9.59, and its cost of capital is 10.15.
Conclusion
In conclusion, the stock of Shutterstock (SSTK, Financial) appears to be significantly undervalued. The company's financial condition is strong, and its profitability is robust. Its growth ranks better than 73.2% of 388 companies in the Interactive Media industry. To learn more about Shutterstock stock, you can check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
