Twitter (TWTR) - Get Report delivered positive Q2 2019 results on Friday, leading its stock to soar 9%. While this is a strong endorsement of the company's execution, there are enough reasons to declare that even now, Twitter's stock is still undervalued.

Twitter's Hard Work Pays Off

Twitter has been very focused over the past several quarters on improving the way conversations take place on its platform. Superficial media headlines have been focused on Twitter's effort to proactively identify and address malicious behavior. But its efforts go much deeper than that.

Twitter has been focused on quickly redesigning its platform to ensure that relevant content within users' timelines surfaces readily. Twitter's CEO Jack Dorsey, (who is also Square's (SQ) - Get Report CEO) declares that topics and events of interest should be very easy to follow on Twitter. With a strong onus on making users' interests surface in near real-time. Also, these topics should be as easy to join and follow as if a user was having a real-life conversation.

Next, Twitter is determined to cement its main competitive advantage as the go-to platform for reliable live coverage of any topic or event of interest. Last week, Twitter followed through on this vision by announcing a partnership with Comcast's (CMCSA) - Get Report  NBC to amplify coverage of the 2020 Tokyo Olympics. Among other things, this partnership will offer Twitter's audience the ability to vote for a chosen live look-in during NBC's Primetime broadcasts each night.

Solid Performance Backed With Financials

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Twitter's top-line has been growing steadily above 15% for some time. Thus, its guided Q3 2019 revenue growth rate of 12% could be seen as a disturbing decline.

However, Twitter argues that this is not the case. Twitter points out that it's taking the bold move to close down certain underperforming legacy ad-formats, which is causing some disruption amongst Twitter's clients who were reliant on these outdated ad-formats.

Furthermore, Dorsey explains how Twitter's new ad-formats will better serve customers by making advertising campaigns easier to get started and deliver enhanced return on investment . In other words, investors should expect some near-term top-line volatility, but not become overly concerned with it.

In fact, Twitter's full-year guidance is pointing towards GAAP expenses growing by 20% year-over-year, as Twitter continues to invest for long-term growth.

Valuation - A Large Margin Of Safety

For much of its first year after going public, Twitter traded above today's share price of roughly $41.50. However, ironically, at the time, investors had no idea if indeed Twitter would be able to generate any cash flows.

Today, a markedly different Twitter stands before us. Not only does Twitter continue to invest for growth, but it's on track to generate roughly $1 billion of adjusted free cash flow.

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Furthermore, as the above highlights, as far as social media platforms go, Twitter's revenues multiples are by far the cheapest amongst its peers. What's more, Snap (SNAP) - Get Report and Pinterest (PINS) - Get Report have no real evidence of their ability to translate their revenues into free cash flow.

Additionally, it should be noted that unlike many tech giants, Twitter has succeeded in avoiding any run-ins with FTC, as well as, carrying no stigma with users.

The Bottom Line

The message coming out of Twitter's Q2 2019 results overwhelmingly pointed to the fact that Twitter's platform is healthy and steadily growing. Investors seeking exposure to one of the rare publicly traded social media platforms which are not priced to perfection could do well to throw in with Twitter.

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