When Will Square, Inc. (NYSE:SQ) Turn A Profit?

Simply Wall St
March 12, 2019
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Square, Inc.'s (NYSE:SQ): Square, Inc. provides payment and point-of-sale solutions in the United States and internationally. The US$32b market-cap company announced a latest loss of -US$38.5m on 31 December 2018 for its most recent financial year result. As path to profitability is the topic on SQ’s investors mind, I’ve decided to gauge market sentiment. I’ve put together a brief outline of industry analyst expectations for SQ, its year of breakeven and its implied growth rate.

See our latest analysis for Square

According to the 29 industry analysts covering SQ, the consensus is breakeven is near. They anticipate the company to incur a final loss in 2019, before generating positive profits of US$136m in 2020. So, SQ is predicted to breakeven approximately a few months from now. What rate will SQ have to grow year-on-year in order to breakeven on this date? Using a line of best fit, I calculated an average annual growth rate of 43%, which is extremely buoyant. If this rate turns out to be too aggressive, SQ may become profitable much later than analysts predict.

NYSE:SQ Past and Future Earnings, March 12th 2019
NYSE:SQ Past and Future Earnings, March 12th 2019

Underlying developments driving SQ’s growth isn’t the focus of this broad overview, but, take into account that generally a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.

Before I wrap up, there’s one issue worth mentioning. SQ currently has a relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in SQ’s case is 80%. A higher level of debt requires more stringent capital management which increases the risk in investing in the loss-making company.

Next Steps:

There are too many aspects of SQ to cover in one brief article, but the key fundamentals for the company can all be found in one place – SQ’s company page on Simply Wall St. I’ve also compiled a list of pertinent aspects you should look at:

  1. Valuation: What is SQ worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether SQ is currently mispriced by the market.
  2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Square’s board and the CEO’s back ground.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.

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