Here’s what to know beyond why Block, Inc. (SQ) is a trending stock

Block (SQ) recently made it to Zacks.com’s most searched stock list. Therefore, you may want to consider some of the key factors that may influence the stock’s performance in the near future.

Shares of this mobile payment service provider have returned -21.2% over the past month compared to the -5.3% change in the Zacks S&P 500 composite. Zacks’ technology services industry, to which belongs to Block, lost 14.7% over this period. Now the key question is: where could the stock be heading in the near term?

Although press releases or rumors about a substantial change in a company’s trading outlook will usually “trend” its stock and cause an immediate price change, there are always fundamental facts that ultimately dominate the take. purchase and retention decision.

Revisions to earnings estimates

At Zacks, we prioritize evaluating change in a company’s future earnings projection over anything else. This is because we believe that the present value of its future income stream is what determines the fair value of its stock.

Our analysis is primarily based on how sell-side analysts covering the stock revise their earnings estimates to reflect the latest trading trends. When a company’s earnings estimates increase, the fair value of its stock also increases. And when the fair value of a stock is higher than its current market price, investors tend to buy the stock, causing its price to rise. For this reason, empirical studies indicate a strong correlation between trends in earnings estimate revisions and short-term movements in stock prices.

For the current quarter, Block is expected to post earnings of $0.13 per share, indicating a -68.3% change from the prior year quarter. The Zacks consensus estimate has changed by +47.7% in the last 30 days.

For the current year, the consensus earnings estimate of $1.03 indicates a change of -39.8% from the prior year. Over the last 30 days, this estimate has changed by -135.8%.

For the next fiscal year, the consensus earnings estimate of $1.69 indicates a change of +64.4% from what Block is expected to report a year ago. Over the past month, the estimate has changed by +231.5%.

With an impressive externally audited track record, our proprietary stock rating tool – the Zacks Ranking – is a more conclusive indicator of a stock’s short-term price performance, as it effectively harnesses the power of earnings estimate revisions. . The magnitude of the recent change in the consensus estimate, along with three other factors related to earnings estimates, resulted in a Zacks No. 3 (hold) ranking for Block.

The chart below shows the evolution of the company’s consensus 12-month EPS estimate:

12 month EPS

Expected revenue growth

Although earnings growth is arguably the most superior indicator of a company’s financial health, nothing as such happens if a company is unable to increase revenue. After all, it is almost impossible for a company to increase its profits for an extended period of time without increasing its revenue. It is therefore important to know the potential revenue growth of a business.

For Block, the consensus sales estimate for the current quarter of $4.23 billion indicates a year-over-year change of -16.4%. For the current and future fiscal years, the estimates of $18.91 billion and $24.02 billion indicate variations of +7.1% and +27.1%, respectively.

Latest reported results and history of surprises

Block reported revenue of $4.08 billion in the last quarter, representing a year-over-year change of +29.1%. EPS of $0.27 for the same period versus $0.32 a year ago.

Compared to the Zacks consensus estimate of $3.98 billion, reported revenue is a surprise of +2.43%. Surprise EPS was +42.11%.

Over the past four quarters, Block has exceeded consensus EPS estimates three times. The company has exceeded consensus revenue estimates twice during this period.

Evaluation

Without considering the valuation of a stock, no investment decision can be effective. Crucial to predicting a stock’s future price performance is whether its current price accurately reflects the intrinsic value of the underlying business and the company’s growth prospects.

While comparing the current values ​​of a company’s valuation multiples, such as the price-to-earnings (P/E) ratio, the price-to-sales (P/S) ratio, and the price-to-cash flow (P/CF) ratio , along with its own historical values ​​help determine whether its stock is fairly valued, overvalued or undervalued, comparing the company against its peers on these metrics gives a good idea of ​​the reasonableness of the stock price .

As part of the Zacks Style Scores system, the Zacks Value Style Score (which assesses both traditional and unconventional valuation metrics) organizes stocks into five groups ranging from A to F (A is better than B; B is better than C; and so on. ), which helps determine whether a stock is overvalued, correctly valued, or temporarily undervalued.

The block is rated D on this front, indicating that it is trading at a premium to its peers. Click here to see values ​​for some of the rating metrics that led to this rating.

Conclusion

The facts discussed here and plenty of other information about Zacks.com might help determine whether it’s worth paying attention to the market buzz about Block. However, its No. 3 Zacks ranking suggests it could perform in line with the broader market in the near term.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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