A strong performer from today's evening trading session is Block, whose shares rose 2.3% to $64.4 per share. For those of you thinking about investing in the stock, here is a brief value analysis of the stock using the company's basic fundamental ratios.
a Lower P/B Ratio Than Its Sector Average but Trading Above Its Fair Price:
Block, Inc., together with its subsidiaries, builds ecosystems focused on commerce and financial products and services in the United States and internationally. The company belongs to the Technology sector, which has an average price to earnings (P/E) ratio of 32.54 and an average price to book (P/B) ratio of 4.25. In contrast, Block has a trailing 12 month P/E ratio of 107.3 and a P/B ratio of 2.09.
When we divideBlock's P/E ratio by its expected five-year EPS growth rate, we obtain a PEG ratio of 0.31, which indicates that the market is undervaluing the company's projected growth (a PEG ratio of 1 indicates a fairly valued company). Your analysis of the stock shouldn't end here. Rather, a good PEG ratio should alert you that it may be worthwhile to take a closer look at the stock.
Increasing Revenues but Narrowing Margins:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $3,298 | $4,714 | $9,498 | $17,661 | $17,532 | $21,916 |
| Gross Margins | 40% | 40% | 28% | 25% | 34% | 34% |
| Net Margins | -1% | 8% | 2% | 1% | -3% | 0% |
| Net Income (M) | -$38 | $375 | $213 | $166 | -$541 | $10 |
| Net Interest Expense (M) | -$18 | -$22 | -$57 | -$33 | -$36 | $47 |
| Depreciation & Amort. (M) | $61 | $76 | $84 | $135 | $341 | $409 |
| Diluted Shares (M) | 406 | 466 | 482 | 502 | 579 | 614 |
| Earnings Per Share | -$0.09 | $0.81 | $0.44 | $0.33 | -$0.93 | $0.02 |
| EPS Growth | n/a | 1000.0% | -45.68% | -25.0% | -381.82% | 102.15% |
| Avg. Price | $62.26 | $68.49 | $120.89 | $234.88 | $104.67 | $64.42 |
| P/E Ratio | -691.78 | 77.83 | 251.85 | 652.44 | -112.55 | 3221.0 |
| Free Cash Flow (M) | $234 | $265 | $35 | $714 | $5 | -$50 |
| CAPEX (M) | $61 | $62 | $138 | $134 | $171 | $151 |
| EV / EBITDA | 1026.56 | 285.15 | 806.45 | 364.23 | -213.87 | 292.21 |
| Total Debt (M) | $900 | $1,431 | $3,282 | $5,428 | $4,570 | $4,120 |
| Net Debt / EBITDA | 13.0 | 3.76 | 1.9 | 3.33 | -0.09 | -6.76 |
| Current Ratio | 2.07 | 1.9 | 1.88 | 1.78 | 1.85 | 1.9 |
Block has rapidly growing revenues and increasing reinvestment in the business and positive EPS growth. Additionally, the company's financial statements display a decent current ratio of 1.9 and healthy leverage levels. However, the firm suffers from slimmer gross margins than its peers and positive cash flows.
