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Square (SQ) Stock Sinks As Market Gains: What You Should Know

Zacks Equity Research
Aspen Technology (AZPN) delivered earnings and revenue surprises of 14.29% and 8.38%, respectively, for the quarter ended March 2019. Do the numbers hold clues to what lies ahead for the stock?

Square (SQ) closed the most recent trading day at $71.35, moving -0.25% from the previous trading session. This move lagged the S&P 500's daily gain of 0.86%. At the same time, the Dow lost 0.06%, and the tech-heavy Nasdaq gained 1.37%.

Coming into today, shares of the mobile payments services provider had gained 25.05% in the past month. In that same time, the Computer and Technology sector gained 6.94%, while the S&P 500 gained 8.11%.

Investors will be hoping for strength from SQ as it approaches its next earnings release, which is expected to be February 26, 2019. In that report, analysts expect SQ to post earnings of $0.13 per share. This would mark year-over-year growth of 62.5%. Our most recent consensus estimate is calling for quarterly revenue of $909.18 million, up 47.58% from the year-ago period.

Investors might also notice recent changes to analyst estimates for SQ. These recent revisions tend to reflect the evolving nature of short-term business trends. With this in mind, we can consider positive estimate revisions a sign of optimism about the company's business outlook.

Based on our research, we believe these estimate revisions are directly related to near-team stock moves. To benefit from this, we have developed the Zacks Rank, a proprietary model which takes these estimate changes into account and provides an actionable rating system.

The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. Over the past month, the Zacks Consensus EPS estimate remained stagnant. SQ is holding a Zacks Rank of #2 (Buy) right now.

In terms of valuation, SQ is currently trading at a Forward P/E ratio of 102.76. Its industry sports an average Forward P/E of 53.52, so we one might conclude that SQ is trading at a premium comparatively.

It is also worth noting that SQ currently has a PEG ratio of 4.11. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. The Internet - Software industry currently had an average PEG ratio of 2.66 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 25, putting it in the top 10% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our individual 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.

You can find more information on all of these metrics, and much more, on Zacks.com.


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