Formerly known as Square and still trading under the same ticker from that era, Block Inc. (SQ, Financial) is a cutting-edge U.S. financial services company and digital payments facilitator. I am bullish on the stock, as are many gurus, including Joel Greenblatt (Trades, Portfolio). Here's my take on Block's prospects and the possible reasoning behind why Greenblatt recently added the stock to his portfolio.
Hedge fund buys
Hedge funds, in general, seem to have become bullish on Block stock. During the most recent quarterly reports, hedge funds have gobbled up shares of Block stock. Among those who are optimistic about the stock is famous value investor Joel Greenblatt (Trades, Portfolio) of Gotham Asset Management; Greenblatt opened a position worth $2,574,922 in the company formerly known as Square, and it now makes up 0.10% of his U.S. listed equity portfolio.
Growth drivers
Block has produced significant growth since commencing operations a little over a decade ago. The company possesses a diverse range of geographical revenue through a comprehensive range of services.
Over the past three years, Block has excelled across all financial line items. The firm has posted three-year compound annual growth rates (CAGRs) in revenue, total assets and levered free cash flow of 77.74%, 40.62% and 88.23%, respectively.
I anticipate the stock's momentum to be sustained due to Block's cryptocurrency exploits via its CashApp product. In addition, Block could experience exponential growth through its latest automation ambitions where it's implementing machine learning processes to automate internal and customer relation processes.
Key metrics
There really is plenty to be excited about for Block investors. The projected earnings per share ratio stands at 32.51%, indicating that investors' residual could increase dramatically. Furthermore, Block has committed an additional 45.67% in internal invested capital, suggesting that further growth is in the cards. Even more impressive is that the company's revenue has grown by 2.6 times the amount of the already elevated re-investment rate, conveying to us that Block is firing in both organic and external growth.
Wall Street's take
Turning to Wall Street, analysts are bullish on the stock, and consensus thinks it's a moderate buy with an average price target of $306.48, which represents 42.12% in potential upside. Out of 22 analyst ratings, 17 have been assigned buy ratings, while four have issued holds and only one has deemed the stock a sell.
Concluding thoughts
Block stock has clearly been a hit among hedge fund managers, and Joel Greenblatt (Trades, Portfolio) is probably the most notable manager to invest the stock in recent times. I agree with Greenblatt and Wall Street that this company is on an exponential growth trend, and could be attractive to growth-focused investors who believe in the power of crypto to transform financials.
