For investors on a limited budget who are looking for growth stocks, Chegg (CHGG +4.13%) and Pinterest (PINS 0.74%) are excellent options. As of this writing, both are selling at a price per share of less than $25.
Chegg is an education technology company with a robust, competitive advantage. Pinterest is an image-based social media company operating in the massive advertising industry. What follows is a consideration of why each is an excellent investment at less than $100.
NYSE: CHGG
Key Data Points
Chegg is popular among college students
Chegg's competitive advantage is the 79 million pieces of proprietary content it has created over the years. The company primarily serves college students who pay between $15 and $20 per month for a subscription that gives them access to the content.
As part of their subscription, students can also ask 20 questions per month that Chegg's experts answer. This question-and-answer approach is how Chegg has built the treasure trove of 79 million step-by-step solutions that help students with college courses.
Chegg has grown revenue by at least 20% in each of its last four fiscal years. The good news for investors is that Chegg's content doubles as a low-cost customer acquisition tool. When students are looking for help with a concept, they type it in to an internet search; if Chegg has content on the subject, it shows up in the search results. A few clicks later, Chegg has a new subscriber.
CHGG Price to Free Cash Flow data by YCharts.
The power of its content to attract subscribers has boosted Chegg's operating profit margin from a negative 1.8% in 2018 to a positive 10.1% in 2021. As it continues building its content database, its profit margin should expand because the need to pay for new content will diminish.
Not only is Chegg inexpensive nominally at a price per share that is less than $25, but it is also as cheap as it's ever been when measured by its price-to-cash-flow ratio of 17.
NYSE: PINS
Key Data Points
Pinterest operates in a massive industry
Pinterest is another stock that investors with less than $100 can buy now. The social media business boasts 433 million monthly active users as of March 31. That was two million higher than the previous quarter. Like other social media sites, it's free to join and use. Pinterest makes money by showing advertisements to users browsing the platform.
Sales have jumped from $473 million in 2017 to $2.6 billion in 2021. Pinterest benefits from its users creating content that attracts other users to the platform. The company needs only invest in the infrastructure that supports content creation and user interaction. This business model has propelled operating income to $326 million in 2021 from a loss of $138 million in 2017.
PINS Price to Free Cash Flow data by YCharts.
Despite Pinterest's impressive revenue growth, it has room to expand. It operates in the advertising industry, worth $763 billion in 2021. That was 22.5% higher than the year before.
Like Chegg, Pinterest is trading near to its lowest price-to-free-cash-flow multiple in the last several years -- at about 20 -- making Pinterest a bargain stock investors can buy for less than $100.
