LegalZoom’s stock price has taken a beating over the past six months, shedding 42.4% of its value and falling to $6.31 per share. This may have investors wondering how to approach the situation.
Following the drawdown, is now the time to buy LZ? Find out in our full research report, it’s free.
Why Does LZ Stock Spark Debate?
Founded by famous lawyer Robert Shapiro, LegalZoom (NASDAQ: LZ) offers online legal services and documentation assistance for individuals and businesses.
Two Positive Attributes:
1. Subscription Units Skyrocket, Fueling Growth Opportunities
As an online marketplace, LegalZoom 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, LegalZoom’s subscription units, a key performance metric for the company, increased by 12.5% annually to 1.94 million in the latest quarter. This growth rate is strong for a consumer internet business and indicates people love using its offerings. 
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 LegalZoom’s take rate, or "cut", on each order.
LegalZoom’s ARPU growth has been exceptional over the last two years, averaging 52.9%. Its ability to increase monetization while growing its subscription units at an impressive rate reflects the strength of its platform, as its users are spending significantly more than last year. 
One Reason to be Careful:
Long-Term Revenue Growth Disappoints
A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Over the last three years, LegalZoom grew its sales at a tepid 6.8% compounded annual growth rate. This wasn’t a great result compared to the rest of the consumer internet sector, but there are still things to like about LegalZoom.
Final Judgment
LegalZoom’s positive characteristics outweigh the negatives. After the recent drawdown, the stock trades at 4.9× forward EV/EBITDA (or $6.31 per share). Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
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