Buy Sq Stock

Block (SQ 0.23%), better known as Square, has dramatically underperformed the stock market in the recent downturn, with shares plunging by more than 65% from the 2021 highs. In this Fool Live video clip, recorded on Jan. 27, Fool.com contributors Matt Frankel, Jason Hall, and Will Healy discuss whether the stock could be worth a closer look for patient long-term investors.

buy sq stock

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10 stocks we like better than Block, Inc.When our award-winning analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

Matt Frankel: Block is down by roughly 62% from its highs, and this is not one that really went meme-stockish it was a stock that was up on its own merit. If you look at the business, just the growth of the business in recent years, there's no reason it shouldn't still be up. In fact, it hit its high in mid 2021, during the summer, about $285 a share.

Since then, the reasons to buy the stock, in my opinion, have increased. Jack Dorsey stepped down from Twitter and now is solely focused on the company, for one thing. The business keeps growing in all the right ways. They're gaining a lot of traction in omnichannel, for example. Their Afterpay acquisition is about to be completed, which will bring a whole new millions of customers into their ecosystem.

Their Afterpay acquisition, by the way, is another kind of like the Lemonade and Metromile deal is an all stock deal. Now that Block shares are down by 62%, they are effectively getting their Afterpay for a lot less. I know Jason and I on a show said that $29 billion was a ridiculous valuation to pay for Afterpay. Now they're paying like $12 billion because they are just paying in Square stock or Block stock, I keep saying both. But let me quickly share my screen. There it is.

But if you're looking at your screen, this is Square's gross profit since 2015, which is when it went public. Unlike some of the other ones we've talked about on the show, Upstart and Shopify. I didn't miss the boat on Square. I've been following this one since the beginning. I always say I invested in Square since before it was cool to investment Square. Shortly after its IPO, it was being called a failed IPO. The stock was doing that poorly. Everyone thought of it is just a niche payment processor company.

This includes not only the person-to-person payment capabilities, but all these adjacent services they keep adding over time. You can buy and sell Bitcoin through the Cash App. You can buy stocks through the Cash App. It's a Robinhood competitor in that way, in that it's just an easy-to-use way place to buy stocks. They have a debit card, they have direct deposit and there's a lot that they can add over time, especially because Square just got a banking charter this past year since it hit its high.

Block stock currently lands a Zacks Rank #3 (Hold) at the moment. While the top-line growth of the company is very intriguing much remains to be seen on the bottom line with inflation affecting many tech stocks over the last year.

The Style Scores are a complementary set of indicators to use alongside the Zacks Rank. It allows the user to better focus on the stocks that are the best fit for his or her personal trading style.

Within each Score, stocks are graded into five groups: A, B, C, D and F. As you might remember from your school days, an A, is better than a B; a B is better than a C; a C is better than a D; and a D is better than an F.

As an investor, you want to buy stocks with the highest probability of success. That means you want to buy stocks with a Zacks Rank #1 or #2, Strong Buy or Buy, which also has a Score of an A or a B in your personal trading style.

Zacks' proprietary data indicates that Block, Inc. is currently rated as a Zacks Rank 3 and we are expecting an inline return from the SQ shares relative to the market in the next few months. In addition, Block, Inc. has a VGM Score of F (this is a weighted average of the individual Style Scores which allow you to focus on the stocks that best fit your personal trading style). Valuation metrics show that Block, Inc. may be overvalued. Its Value Score of D indicates it would be a bad pick for value investors. The financial health and growth prospects of SQ, demonstrate its potential to underperform the market. It currently has a Growth Score of F. Recent price changes and earnings estimate revisions indicate this would be a good stock for momentum investors with a Momentum Score of B.

The ever popular one-page Snapshot reports are generated for virtually every single Zacks Ranked stock. It's packed with all of the company's key stats and salient decision making information. Including the Zacks Rank, Zacks Industry Rank, Style Scores, the Price, Consensus & Surprise chart, graphical estimate analysis and how a stocks stacks up to its peers.

The detailed multi-page Analyst report does an even deeper dive on the company's vital statistics. In addition to all of the proprietary analysis in the Snapshot, the report also visually displays the four components of the Zacks Rank (Agreement, Magnitude, Upside and Surprise); provides a comprehensive overview of the company business drivers, complete with earnings and sales charts; a recap of their last earnings report; and a bulleted list of reasons to buy or sell the stock. It also includes an industry comparison table to see how your stock compares to its expanded industry, and the S&P 500.

The Value Scorecard identifies the stocks most likely to outperform based on its valuation metrics. This list of both classic and unconventional valuation items helps separate which stocks are overvalued, rightly lowly valued, and temporarily undervalued which are poised to move higher.

The Momentum Scorecard focuses on price and earnings momentum and indicates when the timing is right to enter a stock. The analyzed items go beyond simple trend analysis. The tested combination of price performance, and earnings momentum (both actual and estimate revisions), creates a powerful timeliness indicator to help you identify stocks on the move so you know when to get in and when to get out.

The X Industry (aka Expanded Industry) is a subset of the M (Medium Sized) Industry, which is a subset of the larger Sector category, which is used to classify all of the stocks in the Zacks Universe. The Zacks database contains over 10,000 stocks. All of those stocks are classified into three groups: Sector, M Industry and X Industry. There are 17 Sectors, 60 different M Industries, and 265 X Industries.

For example, a regional bank would be classified in the Finance Sector. Within the Finance Sector, it would fall into the M Industry of Banks & Thrifts. And within the M Industry, it might further be delineated into the X Industry group called Banks Northeast. This allows the investor to be as broad or as specific as they want to be when selecting stocks.

The X Industry values displayed in this column are the median values for all of the stocks within their respective industry. When evaluating a stock, it can be useful to compare it to its industry as a point of reference. Moreover, when comparing stocks in different industries, it can become even more important to look at the relative measures, since different stocks in different industries have different values that are considered normal.

Like the earnings yield, which shows the anticipated yield (or return) on a stock based on the earnings and the price paid, the cash yield does the same, but with cash being the numerator instead of earnings. For example, a cash/price ratio, or cash yield, of .08 suggests an 8% return or 8 cents for every $1 of investment.

Enterprise Value / Earnings Before Interest, Taxes, Depreciation and Amortization is a valuation metric used to measure a company's value and is helpful in comparing one stock to another.

Conventional wisdom says that a PEG ratio of 1 or less is considered good (at par or undervalued to its growth rate). A value greater than 1, in general, is not as good (overvalued to its growth rate). For example, a company with a P/E ratio of 25 and a growth rate of 20% would have a PEG ratio of 1.25 (25 / 20 = 1.25). A company with a P/E ratio of 40 and a growth rate of 50% would have a PEG ratio of 0.80 (40 / 50 = 0.80). Traditionally, investors would look at the stock with the lower P/E and deem it a bargain. But when compared to its growth rate, it does't have the earnings growth to justify its P/E. In this example, the one with the P/E of 40 is the better bargain because it is selling at a discount to its growth rate. So the PEG ratio tells you what you're paying for each unit of earnings growth.

The Price to Book ratio or P/B is calculated as market capitalization divided by its book value. (Book value is defined as total assets minus liabilities, preferred stocks, and intangible assets.) In short, this is how much a company is worth. Investors use this metric to determine how a company's stock price stacks up to its intrinsic value.

A P/B of 1 means it's selling at its per share book value. A P/B of 2 means it's selling at 2 times its book value. A P/B of 0.5 means its selling at half its book value. Note; companies will typically sell for more than their book value in much the same way that a company will sell at a multiple of its earnings. The median P/B ratio for stocks in the S&P is just over 3. While a P/B of less than 3 would mean it's trading at a discount to the market, different industries have different median P/B values. So, as with other valuation metrics, it's a good idea to compare it to its relevant industry.

A stock with a P/E ratio of 20, for example, is said to be trading at 20 times its annual earnings. In general, a lower number or multiple is usually considered better that a higher one. Value investors will typically look for stocks with P/E ratios under 20, while growth investors and momentum investors are often willing to pay much more. Aside from using absolute numbers, however, you can also find value by comparing the P/E ratio to its relevant industry and its peers. 041b061a72