2 Reasons to Like IBTA (and 1 Not So Much)

Over the past six months, Ibotta’s stock price fell to $23.40. Shareholders have lost 10.8% of their capital, which is disappointing considering the S&P 500 has climbed by 3.1%. This might have investors contemplating their next move.

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

Why Does IBTA Stock Spark Debate?

Originally launched as a way to make grocery shopping more rewarding for budget-conscious consumers, Ibotta (NYSE:IBTA) is a mobile shopping app that allows consumers to earn cash back on everyday purchases by completing tasks and submitting receipts.

Two Positive Attributes:

1. Skyrocketing Revenue Shows Strong Momentum

A company’s long-term sales performance is one signal of its overall quality. Any business can have short-term success, but a top-tier one grows for years. Over the last three years, Ibotta grew its sales at an incredible 23.3% compounded annual growth rate. Its growth surpassed the average business services company and shows its offerings resonate with customers.

2. 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, Ibotta’s margin expanded by 47.8 percentage points over the last four 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. Ibotta’s free cash flow margin for the trailing 12 months was 17.8%.

One Reason to be Careful:

EPS Took a Dip Over the Last Two Years

Although long-term earnings trends give us the big picture, we like to analyze EPS over a shorter period to see if we are missing a change in the business.

Sadly for Ibotta, its EPS declined by 68% annually over the last two years while its revenue grew by 5.7%. This tells us the company became less profitable on a per-share basis as it expanded.

Final Judgment

Ibotta’s positive characteristics outweigh the negatives. After the recent drawdown, the stock trades at 16.5× forward P/E (or $23.40 per share). Is now the right time to buy? See for yourself in our in-depth research report, it’s free.

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