3 Big Reasons to Love Magnite (MGNI)

What a time it’s been for Magnite. In the past six months alone, the company’s stock price has increased by a massive 55.4%, reaching $24 per share. This was partly due to its solid quarterly results, and the performance may have investors wondering how to approach the situation.

Is now still a good time to buy MGNI? Or are investors being too optimistic? Find out in our full research report, it’s free.

Why Are We Positive On MGNI?

Born from the 2020 merger of Rubicon Project and Telaria, Magnite (NASDAQ:MGNI) operates the world's largest independent sell-side advertising platform that automates the buying and selling of digital advertising inventory across all channels and formats.

1. Skyrocketing Revenue Shows Strong Momentum

Examining a company’s long-term performance can provide clues about its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last five years, Magnite grew its sales at an incredible 33.3% compounded annual growth rate. Its growth beat the average business services company and shows its offerings resonate with customers.

2. 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.

Magnite has shown terrific cash profitability, enabling it to reinvest, return capital to investors, and stay ahead of the competition while maintaining an ample cushion. The company’s free cash flow margin was among the best in the business services sector, averaging 23.6% over the last five years.

3. New Investments Bear Fruit as ROIC Jumps

ROIC, or return on invested capital, is a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Magnite’s ROIC has increased. This is a good sign, but we recognize its lack of profitable growth during the COVID era was the primary reason for the change.

Final Judgment

These are just a few reasons why we think Magnite is a great business, and after the recent rally, the stock trades at 27× forward P/E (or $24 per share). Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.

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