Just crunching some numbers…
Square posted a gross profit of 1.303 billion in 2018, according to their annual report.
They posted adjusted revenue of 1.587 billion according to the chart in this post.
So looking at adjusted revenue, their gross margin in 2018 was 82%. That’s extraordinary!
Q/Q, in their latest quarter, they grew adjusted revenue 59%. That’s up there with the fastest growers followed here.
On an adjusted revenue basis, they are selling at a p/s ratio of 18.39, looking at 2018 revenue and at a p/s ratio of 16.5 factoring in the latest quarter. That’s one of the cheapest p/s ratios out there in the hyper growth realm.
So if we are looking at adjusted revenue, which in square’s case is the important metric, we have.
- Hyper growth close to 60%
- Huge gross margins at 82%
- Cheap valuation relative to the comparable growth cohort.
- A massive market opportunity
Someone tell me why Square isn’t a screaming buy…
I think some people are looking at square and thinking its gross margin is relatively low. But if you back out pass through revenue from ALL of the metrics, a different story is being told.