LegalZoom’s stock price has taken a beating over the past six months, shedding 41.8% of its value and falling to $5.87 per share. This was partly driven by its softer quarterly results and might have investors contemplating their next move.
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 11.6% annually to 1.92 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 35.2%. 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
Reviewing a company’s long-term sales performance reveals insights into its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Unfortunately, LegalZoom’s 7.3% annualized revenue growth over the last three years was tepid. 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 has huge potential even though it has some open questions. With the recent decline, the stock trades at 4.1× forward EV/EBITDA (or $5.87 per share). Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
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