Image source: Square.

2016 has been an up and down year for Square Inc. (NYSE:SQ) on the stock market. Shares have bounced around as financial results have gone from disappointing to promising. But at the end of the day, it was still a year with positive returns for the stock. 

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The bigger question is: What's next? As Square grows up as a company, there are some positive signs heading into what could be its best year yet. 

New products open up exciting markets

Square has spent much of the last two years building out back-office capabilities that will make its product more attractive to small businesses. The company can now handle everything from point-of-sale systems to payroll and small-business loans. This helps build an ecosystem that makes business easy and helps justify going with Square over another payment provider. 

APIs for e-commerce and third-party point-of-sale solutions will help create an environment that's attractive for a growing number of merchants. It's the Register API, in particular, that I think will help attract restaurant owners to Square. Any way to ease the pain in a restaurant transaction will be a plus for millions of customers. 

As new capabilities and integrations are built out there's a feedback loop for Square's development. As more customers use Square it becomes more important for developers to offer Square and as a service in their offering, which will bring more customers to Square. And if Square can keep the cost of adding customers low it will be able to stack an increasing number of revenue streams together to grow the business. 

Financial results are starting to improve

2016 was when we started to see Square's financial results begin to show signs of promise. Between Q1 2016 and Q3 2016, gross payment volume jumped from $10.3 billion to $13.2 billion as a growing number of midsize businesses have signed up for the platform.  And management recently increased full-year guidance from revenue of $1.63 billion-$1.67 billion and adjusted EBITDA of $18 million-$24 million to a new revenue guidance of $1.695 billion-$1.70 billion and adjusted EBITDA of $31 million-$33 million. 

The operational leverage is coming from the fact that operating expenses aren't growing as quickly as revenue. For example, last quarter operating expenses rose 23% while revenue was up 32%. 

Despite the positive trends, net loss last quarter was just $32 million, down from a $54 million loss a year ago. Square isn't yet making money, but it's on its way. 

Will this be Square's best year? 

I think Square is just starting to hit its stride as a business with the suite of product offerings finally beginning to match what small businesses need. And that'll help the company grow as it facilitates more small-business growth around the world. 

It's impossible to predict what Square's stock will do over the next year, but if the business continues its steady improvement, I think the financial performance will improve, which will be great for long-term investors. There will be bumps along the way, but this is a great business for long-term investors because of the crucial services it offers to the marketplace. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.