When we invest, we’re generally looking for stocks that outperform the market average. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. To wit, the Block share price has climbed 63% in five years, easily topping the market return of 50% (ignoring dividends).
On the back of a solid 7-day performance, let’s check what role the company’s fundamentals have played in driving long term shareholder returns.
Check out our latest analysis for Block
Given that Block didn’t make a profit in the last twelve months, we’ll focus on revenue growth to form a quick view of its business development. Shareholders of unprofitable companies usually expect strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
In the last 5 years Block saw its revenue grow at 42% per year. Even measured against other revenue-focussed companies, that’s a good result. While the compound gain of 10% per year is good, it’s not unreasonable given the strong revenue growth. If you think there could be more growth to come, now might be the time to take a close look at Block. Opportunity lies where the market hasn’t fully priced growth in the underlying business.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
Block is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. You can see what analysts are predicting for Block in this interactive graph of future profit estimates.
A Different Perspective
We regret to report that Block shareholders are down 43% for the year. Unfortunately, that’s worse than the broader market decline of 10%. Having said that, it’s inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Longer term investors wouldn’t be so upset, since they would have made 10%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Even so, be aware that Block is showing 2 warning signs in our investment analysis , you should know about…
Of course Block may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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