Here's Why Block (NYSE:XYZ) Has Caught The Eye Of Investors
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It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.
If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Block (NYSE:XYZ). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.
Block's Improving Profits
In business, profits are a key measure of success; and share prices tend to reflect earnings per share (EPS) performance. So a growing EPS generally brings attention to a company in the eyes of prospective investors. Commendations have to be given in seeing that Block grew its EPS from US$0.63 to US$4.27, in one short year. While it's difficult to sustain growth at that level, it bodes well for the company's outlook for the future.
It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. The music to the ears of Block shareholders is that EBIT margins have grown from 0.9% to 4.6% in the last 12 months and revenues are on an upwards trend as well. That's great to see, on both counts.
In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.
Check out our latest analysis for Block
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Block's forecast profits?
Are Block Insiders Aligned With All Shareholders?
Since Block has a market capitalisation of US$39b, we wouldn't expect insiders to hold a large percentage of shares. But we do take comfort from the fact that they are investors in the company. We note that their impressive stake in the company is worth US$4.2b. This suggests that leadership will be very mindful of shareholders' interests when making decisions!
Is Block Worth Keeping An Eye On?
Block's earnings per share have been soaring, with growth rates sky high. This level of EPS growth does wonders for attracting investment, and the large insider investment in the company is just the cherry on top. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. Based on the sum of its parts, we definitely think its worth watching Block very closely. Don't forget that there may still be risks. For instance, we've identified 1 warning sign for Block that you should be aware of.