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What’s Square’s Valuation?

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Mar. 28 2018, Updated 9:01 a.m. ET

A look at Square’s enterprise value and related multiple

Square (SQ) had an enterprise value (or EV) of $21.4 billion for 2017. In comparison, eBay (EBAY), PayPal (PYPL), Baidu (BIDU), and Yelp (YELP), Square’s peer companies in the Internet sector, have enterprise values (or EV) of $45.2 billion, $89.6 billion, $78.4 billion, and $2.8 billion, respectively.

How does Square’s EV compare with its adjusted EBITDA (adjusted earnings before interest, tax, depreciation, and amortization) for the last 12 months? The company’s EV-to-adjusted EBITDA for the trailing 12 months computes to 426.2x, which compares with an EV-to-EBITDA of 85.0x expected in 2018. Square’s EBITDA margin for 2017 is 2%.

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A further look at the company’s EV ratios shows that EV-to-sales for the trailing 12 months is 9.6x and that the EV to sales anticipated for 2018 is 12.4x. Moreover, the trailing-12-month EV-to-cash flow to the company was 162.2x, which also compared with the trailing-12-month EV-to-free-cash flow to the company of 210.2x.

Square’s price multiple

Square’s book value per share works out to $2.02, while its estimated book value per share is $1.4. The stock is trading at a price-to-book value of 27.7x. The company’s price-to-sales is 9.9x for 2017 and the estimated price-to-sales for 2018 is 16.3x.

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Analyst recommendations

Of the 33 analysts covering Square, 18 have given it a “buy” recommendation, one has recommended a “sell,” and 14 have recommended a “hold.” Analysts’ stock price target for the company is $47.65, and the median price target for the company is $50.

Relative strength index

For the last 14 days, Square reported a relative strength index (or RSI) of 74 compared to 26, 49, 38, and 43 recorded by eBay, PayPal, Baidu, and Yelp, respectively, within the same period.

Moving averages

Square stock was trading at $55.16, 31.3% above its 100-day moving average of $42, -19.9% above its 50-day moving average of $46, and 8.2% above its 20-day moving average of $51.

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