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Square (SQ) Dips More Than Broader Markets: What You Should Know

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Square (SQ - Free Report) closed the most recent trading day at $85.30, moving -1.53% from the previous trading session. The stock lagged the S&P 500's daily loss of 0.04%. Elsewhere, the Dow gained 0.33%, while the tech-heavy Nasdaq lost 0.51%.

Prior to today's trading, shares of the mobile payments services provider had gained 12.18% over the past month. This has outpaced the Computer and Technology sector's gain of 2.29% and the S&P 500's gain of 2.79% in that time.

SQ will be looking to display strength as it nears its next earnings release, which is expected to be November 14, 2018. On that day, SQ is projected to report earnings of $0.11 per share, which would represent year-over-year growth of 57.14%. Our most recent consensus estimate is calling for quarterly revenue of $860.52 million, up 47.06% from the year-ago period.

For the full year, our Zacks Consensus Estimates are projecting earnings of $0.45 per share and revenue of $3.23 billion, which would represent changes of +66.67% and +45.72%, respectively, from the prior year.

It is also important to note the recent changes to analyst estimates for SQ. These revisions typically reflect the latest short-term business trends, which can change frequently. As such, positive estimate revisions reflect analyst optimism about the company's business and profitability.

Research indicates that these estimate revisions are directly correlated with near-term share price momentum. Investors can capitalize on this by using the Zacks Rank. This model considers these estimate changes and provides a simple, actionable rating system.

Ranging from #1 (Strong Buy) to #5 (Strong Sell), the Zacks Rank system has a proven, outside-audited track record of outperformance, with #1 stocks returning an average of +25% annually since 1988. Within the past 30 days, our consensus EPS projection remained stagnant. SQ is currently a Zacks Rank #3 (Hold).

Investors should also note SQ's current valuation metrics, including its Forward P/E ratio of 191.3. For comparison, its industry has an average Forward P/E of 69.74, which means SQ is trading at a premium to the group.

We can also see that SQ currently has a PEG ratio of 7.65. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. The Internet - Software industry currently had an average PEG ratio of 4.04 as of yesterday's close.

The Internet - Software industry is part of the Computer and Technology sector. This group has a Zacks Industry Rank of 92, putting it in the top 36% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

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