Inside Square’s price and valuation multiples
Square’s current book value per share of $1.9 compares with expected book value per share of $1.2 for 2017. Square (SQ) stock is trading at a price-to-book value of ~14.9x.
In comparison, peers Alibaba (BABA), eBay (EBAY), Amazon (AMZN), and PayPal’s (PYPL) current book value per share is ~$17.4, ~$10.7, ~$48.5, ~$12.5, respectively. The company’s price-to-sales ratio of ~5.5x also compares with an estimated price-to-sales ratio of ~11.2x for 2017.
How much debt is Square carrying?
Square’s balance sheet reflects total debt of $350 million. The company reported total capital of ~$1,054 million. So if you work out its total-debt-to-total-capital ratio, you come to 33%. The company’s debt-to-assets, debt-to-equity, and debt-to-EBITDA ratios are 0.20x, 49.73x, and 15.82x, respectively.
Examining Square’s cash flow metrics
Square has $920 million as cash in hand. Its price-to-cash-flow and price-to-free-cash-flow calculate to 72.0x and 85.8x, respectively. For the trailing 12 months, the company’s EV-to-cash flow was 68.11x and its EV-to-free-cash-flow was 81.14x.
Shareholder returns and stock trends
Square generated investor returns of 9.8% in the trailing-one-month period and 132.0% in the trailing-12-month period. The company’s share price fell 4.3% in the trailing-five-day period.
In comparison, Alibaba, eBay, Amazon, and PayPal, Square’s peer companies in the Internet sector, generated returns of 57.5%, 17.8%, 16.4%, and 58.5%, respectively, in the trailing-12-month period.
Square stock was trading at $27.45, 9.8% above its 100-day moving average of $25, 5.6% above its 50-day moving average of $26, and 1.7% above its 20-day moving average of $27.
Of the 31 analysts covering Square, 17 have given it a “buy” recommendation, none have recommended a “sell,” and 14 have recommended a “hold.” Analysts’ stock price target for the company is $28.11 and their median price target for the company is $29. Square is trading at a discount of 5.3% to its median target.
Earnings and sales
The EPS for last year came on total sales of $1,904 million, which grew 25% annually. Sales for this year are expected to expand to ~$941.6 million in 2016 to ~$1,174.5 million next year.