What a brutal six months it’s been for Sea. The stock has dropped 26.2% and now trades at $103.18, rattling many shareholders. This might have investors contemplating their next move.
Following the drawdown, is now an opportune time to buy SE? Find out in our full research report, it’s free.
Why Is Sea a Good Business?
Founded in 2009 and a publicly traded company since 2017, Sea (NYSE: SE) started as a gaming platform and has since expanded to offer a variety of services such as e-commerce, digital payments, and financial services across Southeast Asia.
1. Paying Users Skyrocket, Fueling Growth Opportunities
As an online marketplace, Sea generates revenue growth by increasing both the number of users on its platform and the average order size in dollars.
Over the last two years, Sea’s paying users, a key performance metric for the company, increased by 22.7% annually to 72.6 million in the latest quarter. This growth rate is among the fastest of any consumer internet business and indicates its offerings have significant traction. 
2. Eye-Popping Growth in Customer Spending
Average revenue per user (ARPU) is a critical metric to track because it measures how much the company earns in transaction fees from each user. ARPU also gives us unique insights into a user’s average order size and Sea’s take rate, or “cut”, on each order.
Sea’s ARPU growth has been exceptional over the last two years, averaging 12.6%. Its ability to increase monetization while growing its paying users at an impressive rate reflects the strength of its platform, as its users are spending significantly more than last year. 
3. 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, Sea’s margin expanded by 18.4 percentage points over the last few 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. Sea’s free cash flow margin for the trailing 12 months was 20.7%.
Final Judgment
These are just a few reasons why we think Sea is one of the best consumer internet companies out there. After the recent drawdown, the stock trades at 4.4× forward price-to-gross profit (or $103.18 per share). Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
Stocks We Like Even More Than Sea
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