Mobile payment and business solutions company Square (NYSE:SQ) has trounced the market recently. The stock is up 177% in the past 12 months, and 97% year to date. Still a fairly new publicly traded stock, Square's rising stock price since its 2015 IPO has likely attracted attention from lots of investors.
Does Square live up to the hype? For investors interested in the fast-growing company, here's a close look at the stock and, more importantly, the underlying factors driving Square's growth.
1. Square has nearly tripled its IPO price.
Since going public on November 18, 2015, at $9 a share, Square stock has soared 198% at the time of this writing, with shares trading at just under $27.
2. It has expanded beyond mobile credit card readers.
Though the company's roots started with the creation of a small, white mobile card reader that made accepting payments more intuitive and affordable for small business, Square has expanded beyond its first card reader. Not only has Square's point-of-sale system expanded to include technology for contactless payments and chip readers, but Square offers working capital loans (Square Capital), employee management and payroll services, customer relationship management tools, and more.
Highlighting Square's growth outside of mobile transactions, the company's revenue generated from new business products launched since 2014 now account for nearly a third of Square's total revenue. This new revenue is primarily driven by Square Capital, Instant Deposit, and application program interfaces (APIs) for businesses to customize their Square business solutions.
3. Transaction-based revenue still represents the bulk of Square's business.
Despite the rise of Square's new subscription and services-based revenue, the company's transaction revenue still accounts for 87% of Square's total revenue. Fortunately, this business is still performing very well; transaction-based revenue was up 34% year over year in Square's first quarter of 2017.
4. Revenue from subscription and services-based products is soaring.
Though payments may still be Square's bread and butter, the company is proving its ability to launch new products that resonate with its clients. Subscription and services-based revenue in Square's first quarter of 2017 was up 106% year over year. The growth, management said, was primarily driven by its food delivery service, Square Capital, and Instant Deposit.
5. Square Capital has a $14 billion market opportunity in the U.S.
For comparison, management defines Square's market opportunity for U.S. payments at $26 billion. Square's nascent loan business has lent $1.5 billion since 2014, including $251 million in the first quarter of 2017.
6. Square's closest competitors are doing well, too.
Square isn't the only stock in the small business solutions and mobile payment space that is on fire lately. Shares of e-commerce platform company Shopify and fintech leader PayPal have seen their stocks rise 112% and 49% year to date, respectively, at the time of this writing. During this period, Square's stock has risen about 97%.
7. Square isn't profitable yet.
But it's getting close. The company's net loss in the first quarter of 2017 was $15 million, far narrower than its $97 million loss in the year-ago quarter. Similarly, Square's adjusted net income is showing improvements, hitting about $20 million in the first quarter, up from a $15 million loss in the year-ago quarter.
With this information about Square in mind, it's easy to see why the mobile payment company's stock has been soaring recently. Of course, the stock's recent rapid ascent and Square's impressive business growth don't automatically mean the stock will continue to be an outperformer. But these easily overlooked facts about Square make the company seem worthy of further analysis -- and possibly a place on your watchlist.
Daniel Sparks has no position in any stocks mentioned. The Motley Fool owns shares of and recommends PayPal Holdings and Shopify. The Motley Fool owns shares of Square. The Motley Fool has a disclosure policy.