Circle the Square

Jack Dorsey goes for gold Wall Street Connected Profit Like The Pros Brought to you by: Dear subscriber, 468 billion credit card transactions were processed in 2020. These days, you don’t need to be a big name to take plastic. Square made it easy for everyone from barbershops to flea market kiosks to accept credit cards. Today’s quarterly results show a company hell-bent on growth with Jack Dorsey at the helm. Not only did the company turn a healthy profit, but it also announced a $29 billion acquisition of Australian fintech company Afterpay. As one of the hottest searches in our TrackstarIQ Data coming off the weekend, we dove into the earnings to find out how good this company really was. Mobile pay is the way of the future Square mobile payment reader When was the last time you carried cash? Ask 100 teenagers who is on the two dollar bill and you’ll get the inevitable “there’s no two dollar bill.” It’s Thomas Jefferson for you trivia nuts. Square was one of the first adopters of mobile payment. But before that, they changed the game with their mobile payment reader seen above. Square’s unique technology allowed anyone with a smartphone to accept credit card payments. Since then, they’ve expanded into a Cash App which allows mobile person-to-person payments, payroll for small business owners, API platform interfaces, and most recently, a small business focused financial services arm. One thing most people don’t know is Square’s investment in Bitcoin. Like Tesla, the initial boost to earnings became a drag this past quarter. Their growth has been stunning with a 5-year average of ~50%. 2020 saw a jump of 101.5%. Like many fintech growth companies, Square didn’t turn a profit until 2019. Since then, they’ve held pretty steady at around $0.80 per share. That gives them a current price-to-earnings ratio of 343x, not cheap by any means. Even with its non-GAAP results, the P/E sits at 197.81x with a forward P/E of 161.21. A better gauge to judge them by is the price to earnings growth ratio. This comes in at 3.47x non-GAAP, 42.67x GAAP. That’s higher than the sector median of 1.83x and 0.56x. But, it’s not outlandish. It’s all about growth. Under most measures, Square is overvalued compared to its competition. Even the margins look bad. That’s because their story is all about growth. Take the Cash App for example. In the latest quarter, revenue jumped 177% to $3.33 billion while profit nearly doubled. You keep growth like that up and earnings will quickly catch up. But here’s an easy metric to understand their value. Compared to Visa (V) and PayPal (PYPL), Square garners an 8.45x price to sales ratio. Visa and PayPal land at 23.2x and 13.56x respectively. What the market is telling us is it believes Square can achieve profitable operations like these two companies in time. Our hot take It’s tough to grab a company near their all-time highs. Especially after it’s gone up more than 600% from the March lows. But when it sees a significant pullback, assuming things are on track, there’s a lot of value to be had. Sponsored [Get Convenient Access to Bitcoin Right From Your Brokerage Account]( The Osprey Bitcoin Trust ($OBTC) offers easy access to bitcoin right from your brokerage account or IRA. It’s the lowest cost bitcoin fund in the U.S. No wallets or keys required. [Check Us Out HERE]( What we’re watching [Wall Street Connected: Docusign]( A look at e-signature and legal document checking AI technology company Docusign. [Watch Now]( OUR RECENT POSTS [Bet on oil the right way]( Understanding energy ETFs [Read more]( [UPS: Buy the dip?]( What can brown do for you? [Read more]( - The Editorial Staff # [submit to reddit]( [submit to reddit]( [submit to reddit]( To ensure delivery of all emails, [whitelist us](. Update your email preferences or unsubscribe [here](#). View our privacy policy [here](#). Copyright ©2021 InvestingChannel. All rights reserved. 1325 Avenue of the Americas, Floor 27 & 28 New York, New York 10019 Disclaimer: This is not investment advice. This InvestingChannel, Inc. newsletter is for information purposes only and opinion-based. Futures, forex, stock, and options trading are not appropriate for all investors. There is a substantial risk of loss associated with trading these markets. Losses can and will occur. No system or methodology has ever been developed that can ensure returns or against losses. No representation or implication is being made that using any of these methodologies or systems will generate returns or ensure against losses. Investors should be cautious about any and all investments and are advised to conduct their own due diligence prior to making any investment decisions. [Link](