APPLOVIN CORP-CLASS A (NASDAQ:APP) – A Strong Growth Stock with Reasonable Valuation

APPLOVIN CORP-CLASS A (NASDAQ:APP) was identified as an affordable growth stock by our stock screener. The company, which operates a mobile marketing platform and a portfolio of free-to-play mobile games, demonstrates strong growth potential while maintaining solid profitability and financial health. Its valuation, though not the cheapest, appears reasonable given its growth trajectory. Below, we examine why APP fits the criteria for an affordable growth stock.

Growth Prospects

APP’s growth metrics stand out, earning a 9/10 rating in this category. Key highlights include:

• Earnings Per Share (EPS) surged by 262.5% over the past year, with an average annual growth rate of 84.87% over multiple years.
• Revenue growth was strong at 41.63% in the last year, with a three-year average of 36.49%.
• Analysts expect future EPS growth of 31.97% annually, alongside projected revenue growth of 21.14%.

These figures suggest APP is not only expanding rapidly but is also expected to sustain above-average growth in the coming years.

Valuation Assessment

With a 5/10 valuation rating, APP is not the cheapest stock in its sector, but it offers a balanced price relative to its growth:

• The P/E ratio of 56.55 is high compared to the S&P 500 average (26.34), but in line with industry peers.
• The forward P/E of 31.36 is more reasonable, with 60.21% of industry stocks trading at higher multiples.
• The PEG ratio, which accounts for growth, suggests the stock is fairly valued.
• Enterprise Value/EBITDA and Price/Free Cash Flow ratios indicate APP is priced more attractively than many competitors.

Profitability & Financial Health

APP scores 8/10 in both profitability and financial health, reinforcing its investment appeal:

• High Margins: Operating margin of 46.47% and profit margin of 37.37% rank in the top tier of its industry.
• Strong Returns: Return on Equity (333.52%) and Return on Invested Capital (43.87%) are exceptional.
• Solid Solvency: A healthy Altman-Z score (16.15) and manageable debt levels suggest low bankruptcy risk.

While the company carries a high debt-to-equity ratio (6.10), its strong cash flow generation mitigates concerns.

For a deeper look at APP’s fundamentals, review the full analysis here.

Our Affordable Growth screener lists more stocks with strong growth and reasonable valuations, updated daily.

Disclaimer

This is not investing advice. The observations here are based on data available at the time of writing. Always conduct your own research before making investment decisions.