![]() The company faces an uphill battle with larger competitors, but that makes the company's strong revenue growth last quarter look that much more attractive. Wall Street analysts expect Dropbox to grow earnings 17% per year over the next five years. The stock trades at a forward PE of 50 times next year's earnings estimates. However, the shares fetch a more reasonable 25 times multiple based on management's 2018 free cash flow target of $350 million. While investors readjust their expectations, management continues to build a powerful suite of tools for its more than 500 million registered users. The company has been having success getting a portion of its user base to try premium features for a subscription fee. At the end of the third quarter, Dropbox had 12.3 million paying users. What's even better is that the average revenue per user increased 6% year over year to $118.60, reflecting the high value users place on Dropbox's features. At one point in early 2018, Dropbox had a total market capitalization (total shares outstanding times the stock price) of more than $15 billion. That's a rich value to place on a company that hasn't reported a profit on a GAAP basis, and only generated $329 million in free cash flow over the last year. However, this strong performance hasn't been enough to justify the high expectations reflected in its stock price. ![]()
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