Strong week for Block (NYSE:SQ) shareholders doesn't alleviate pain of three-year loss

Many investors define successful investing as beating the market average over the long term. But if you try your hand at stock picking, your risk returning less than the market. We regret to report that long term Block, Inc. (NYSE:SQ) shareholders have had that experience, with the share price dropping 29% in three years, versus a market return of about 36%. And over the last year the share price fell 24%, so we doubt many shareholders are delighted. The falls have accelerated recently, with the share price down 21% in the last three months.

While the stock has risen 7.6% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

View our latest analysis for Block

Block wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Shareholders of unprofitable companies usually expect strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

Over three years, Block grew revenue at 33% per year. That's well above most other pre-profit companies. The share price drop of 9% per year over three years would be considered disappointing by many, so you might argue the company is getting little credit for its impressive revenue growth. It's possible that the prior share price assumed unrealistically high future growth. Still, with high hopes now tempered, now might prove to be an opportunity to buy.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

earnings-and-revenue-growth

Block is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. Given we have quite a good number of analyst forecasts, it might be well worth checking out this free chart depicting consensus estimates.

A Different Perspective

While the broader market gained around 4.2% in the last year, Block shareholders lost 24%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 0.5% per year over half a decade. 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. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Even so, be aware that Block is showing 2 warning signs in our investment analysis , you should know about...

We will like Block better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.

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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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