Shareholders of Pure Storage would probably like to forget the past six months even happened. The stock dropped 27% and now trades at $63.60. This might have investors contemplating their next move.
Given the weaker price action, is now a good time to buy PSTG? Find out in our full research report, it’s free.
Why Are We Positive On PSTG?
Founded in 2009 as a pioneer in enterprise all-flash storage technology, Pure Storage (NYSE: PSTG) provides all-flash data storage hardware and software that helps organizations manage their data more efficiently across on-premises and cloud environments.
1. ARR Surges as Recurring Revenue Flows In
In addition to reported revenue, ARR (annual recurring revenue) is a useful data point for analyzing Hardware & Infrastructure companies. This metric shows how much Pure Storage expects to collect from its existing customer base in the next 12 months, giving visibility into its future revenue streams.
Pure Storage’s ARR punched in at $1.92 billion in the latest quarter, and over the last two years, its year-on-year growth averaged 20.1%. This performance was fantastic and shows that customers are willing to take multi-year bets on the company’s product offerings. Its growth also makes Pure Storage a more predictable business, a tailwind for its valuation as investors typically prefer businesses with recurring revenue. 
2. Outstanding Long-Term EPS Growth
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Pure Storage’s EPS grew at 61.7% compounded annual growth rate over the last five years, higher than its 16.8% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
3. Excellent Free Cash Flow Margin Boosts Reinvestment Potential
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.
Pure Storage 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 17.4% over the last five years.
Final Judgment
These are just a few reasons why we're bullish on Pure Storage. After the recent drawdown, the stock trades at 27.2× forward P/E (or $63.60 per share). Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
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