Financial Pros Pick a 10/10

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Unsurprisingly, we’ve previously relied on Shutterstock (SSTK) for images.

So, we were curious when the financial pros searched this stock out at a clip more than 14x the closely related company Getty Images (GETY).

It could have something to do with the stock skyrocketing 65% and then puking all those gains in a few short months.

Source: Barchart.com

Much to our surprise, we found a small stock with a decent business model and a compelling valuation.

Shutterstock’s Business

As far as we knew, Shutterstock was only a stock image website. It turns out that’s just scratching the surface.

In fact, the company has been around since 2003.

The company contains a comprehensive content library that includes everything from videos to 3D models.

Source: Shutterstock Investorday Presentation

Recently, the company bought Giphy from Meta for $53 million, as Meta took a $262 million loss…ouch!

Subscribers can choose from a paid subscription or a la carte pricing for different liscences.

Financials

Source: Stock Analysis

While Shutterstock isn’t doubling every year, it’s seen steady growth that waffles between single and double digits, with no annual declines since 2015.

During that same period, gross margins improved, while operating margin doubled in 2020, but has slowly tapered since then.

Shutterstock holds $45 million in debt but also holds $95 million in cash, giving it plenty of capital to acquire and grow its business.

Even more important, the company generates $245 million in cash from operations and more than $100 million in free cash flow. That gives it plenty of coverage for its 2.0% dividend.

Valuation

Source: Seeking Alpha

As we mentioned earlier, SSTK trades at a compelling valuation.

It’s only 9.5x cash and 2.3x sales, though the P/E ratio over 20 is a bit rich. However, a good chunk of that is driven by share based compensation and depreciations. Excluding those, SSTK trades at 11.7x EBITDA.

Growth

Source: Seeking Alpha

While revenue growth hasn’t been explosive like Nextdoor (KIND) or Eventbrite (EB), it’s been steady and usually in the high single digits.

With a profitable business model and juicy cash flow, SSTK has the firepower to buy growth.

Profitability

Source: Seeking Alpha

Despite a 61.7% gross margin, SSTK is actually the lowest amongst its peers, which is kind of ridiculous.

However, it’s got a great EBITDA margin and the only one other than ZipReruiter (ZIP) with a positive net income margin.

Our Opinion 10/10

We looked hard to see if we could determine why Shutterstock sold off in early May and found no news event or cause.

With just a bit more than 23 million shares trading, the stock is bound to be volatile.

Nonetheless, we like the business here and see limited downside from these prices.