Should You Buy Block Stock Now?
Block (NYSE:XYZ), a fintech company, has seen its stock price plummet by over 40% this year amidst a broader market sell-off, sparked by President Donald Trump’s confirmation of tariffs and the escalating trade war with China. This situation is particularly concerning for fintech companies, as tariffs could fuel inflation, potentially delaying near-term interest rate cuts by the U.S. Federal Reserve. Moreover, rising recession fears and falling consumer sentiment further contribute to the negative outlook. Our take on market crash risk right now has more details on tariffs and its impact on the broader market.
Block, formerly known as Square, offers a comprehensive suite of technology-driven financial services. Initially known for its digital payments and point-of-sale hardware and software, Block has since expanded its offerings to include a wider range of financial products, from payment processing to loans and banking services. Additionally, Block facilitates bitcoin trading by acquiring the cryptocurrency from private dealers and selling it to its users with a small markup.
Following its recent decline, Block’s stock, currently trading around $50, appears to be a good buying opportunity, in our view. While we acknowledge certain concerns surrounding the company, we believe its current valuation is low, indicating that the negative aspects are largely priced into the stock. This assessment is derived from a comparison of Block’s current valuation with its recent operating performance, as well as its present and past financial health. Our analysis, which considers key factors like Growth, Profitability, Financial Stability, and Downturn Resilience, reveals that Block has a moderate operating performance and financial condition, the specifics of which will be elaborated upon below. That said, if you seek upside with lower volatility than individual stocks, the Trefis High-Quality portfolio presents an alternative – having outperformed the S&P 500 and generated returns exceeding 75% since its inception.
Image by Kevin Campbell from Pixabay
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How Does Block’s Valuation Look vs. The S&P 500?
Going by what you pay per dollar of sales or profit, XYZ stock looks slightly cheap compared to the broader market.
• Block has a price-to-sales (P/S) ratio of 1.4 vs. a figure of 3.2 for the S&P 500
• Additionally, the company’s price-to-operating income (P/EBIT) ratio is 19.9 compared to 24.3 for S&P 500
• And, it has a price-to-earnings (P/E) ratio of 19.6 vs. the benchmark’s 24.3
How Have Block’s Revenues Grown Over Recent Years?
Block’s Revenues have seen some growth over recent years.
• Block has seen its top line grow at an average rate of 11.4% over the last 3 years (vs. increase of 6.3% for S&P 500)
• Its revenues have grown 10.1% from $22 Bil to $24 Bil in the last 12 months (vs. growth of 5.2% for S&P 500)
• Also, its quarterly revenues grew 4.5% to $6.0 Bil in the most recent quarter from $5.8 Bil a year ago (vs. 5.0% improvement for S&P 500)
How Profitable Is Block?
Block’s profit margins are much worse than most companies in the Trefis coverage universe.
• Block’s Operating Income over the last four quarters was $1.7 Bil, which represents a poor Operating Margin of 7.0% (vs. 13.0% for S&P 500)
• Block’s Operating Cash Flow (OCF) over this period was $1.7 Bil, pointing to a poor OCF-to-Sales Ratio of 7.1% (vs. 15.7% for S&P 500)
Does Block Look Financially Stable?
Block’s balance sheet looks strong.
• Block’s Debt figure was $7.9 Bil at the end of the most recent quarter, while its market capitalization is $30 Bil (as of 4/8/2025). This implies a moderate Debt-to-Equity Ratio of 23.6% (vs. 19.0% for S&P 500). [Note: A lower Debt-to-Equity Ratio is desirable]
• Cash (including cash equivalents) makes up $13 Bil of the $37 Bil in Total Assets for Block. This yields a very strong Cash-to-Assets Ratio of 34.7% (vs. 14.8% for S&P 500)
How Resilient Is XYZ Stock During A Downturn?
XYZ stock has fared worse than the benchmark S&P 500 index during some of the recent downturns. While investors have their fingers crossed for a soft landing by the U.S. economy, how bad can things get if there is another recession? Our dashboard How Low Can Stocks Go During A Market Crash captures how key stocks fared during and after the last six market crashes.
Inflation Shock (2022)
• XYZ stock fell 86.1% from a high of $281.81 on 5 August 2021 to $39.22 on 30 October 2023, vs. a peak-to-trough decline of 25.4% for the S&P 500
• The stock is yet to recover to its pre-Crisis high
• The highest the stock has reached since then is $98.92 on 4 December 2024 and currently trades at around $49
Covid Pandemic (2020)
• XYZ stock fell 55.6% from a high of $85.70 on 20 February 2020 to $38.09 on 20 March 2020, vs. a peak-to-trough decline of 33.9% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 2 June 2020
Putting All The Pieces Together: What It Means For XYZ Stock
In summary, Block’s performance across the parameters detailed above are as follows:
• Growth: Strong
• Profitability: Very Weak
• Financial Stability: Very Strong
• Downturn Resilience: Very Weak
• Overall: Neutral
While Block’s performance across various parameters is neutral, we believe its current low valuation presents an attractive buying opportunity for XYZ stock at around $50. This conclusion is supported by the fact that Block’s price-to-sales ratio of 1.4x is currently 50% below its four-year average of 2.8x. Although concerns exist, such as low margins and the stock’s historical weakness during economic downturns, we believe that Block’s current valuation adequately reflects the challenges posed by the company. Therefore, we see the current price level as an attractive entry point for potentially robust long-term gains.
While XYZ stock may see higher levels, the Trefis Reinforced Value (RV) Portfolio has outperformed its all-cap stocks benchmark (combination of the S&P 500, S&P mid-cap, and Russell 2000 benchmark indices) to produce strong returns for investors. Why is that? The quarterly rebalanced mix of large-, mid- and small-cap RV Portfolio stocks provided a responsive way to make the most of upbeat market conditions while limiting losses when markets head south, as detailed in RV Portfolio performance metrics.
| Returns | Apr 2025 MTD [1] |
2025 YTD [1] |
2017-25 Total [2] |
| XYZ Return | -10% | -42% | 260% |
| S&P 500 Return | -11% | -15% | 123% |
| Trefis Reinforced Value Portfolio | -9% | -17% | 496% |
[1] Returns as of 4/9/2025
[2] Cumulative total returns since the end of 2016
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