After a precipitous decline near the end of 2018, Square (NYSE:SQ) stock has come roaring back, gaining 58% since its late December lows. Several factors have contributed to the merchant services aggregator and mobile payment company's rise, including its better-than-expected performance in the first quarter. Its rise has been anything but steady, however: The stock declined 17% in May following Square's most recent earnings report, with soft guidance taking the rap for the falling stock price.

Square is scheduled to share the results of its second quarter after the market close on Thursday. Let's recap the company's Q1 figures and its forecast, to see if they offer any insight into what investors can expect when Square reports earnings.

A merchant slides a credit card into a Square terminal while a customer waits with a shopping bag.

Image source: Square.

Continuing revenue growth

For the first quarter, Square reported total net revenue of $959 million, up 43% year over year. Adjusted revenue -- which excludes bitcoin costs, transaction-based costs, and purchase accounting adjustments -- was up an even more impressive 59% to $489 million. Excluding the acquisitions of Weebly and Zesty (which were completed in Q2 of last year), net revenue and adjusted revenue grew 39% and 49% year over year, respectively.

Cash App volume contributed to the growth, increasing 250% year over year. This was the result of the expanding network effects, reach, and engagement of users joining the ecosystem.

Bottom-line improvement

On an adjusted basis, Square's earnings before interest, taxes, depreciation, and amortization (EBITDA) grew to $62 million, up 72% year over year. That more than doubled the 33% growth in the prior-year quarter. This resulted in adjusted earnings per share (EPS) of $0.11, nearly double the $0.06 generated in the year-ago period.

Under generally accepted accounting principles (GAAP), Square reported a net loss of $38 million, far worse than the $24 million loss it reported in the prior-year quarter -- but looks can be deceiving. Its strategic investment in Eventbrite incurred paper losses of $14 million, so excluding that resulted in a net loss of $24 million, comparable with the year-ago quarter. Square continues to invest heavily in its future growth, so these losses will likely continue for some time.

Guidance was the key

For the upcoming second quarter, management provided somewhat conservative guidance, leading to the monthlong sell-off. Square is expecting adjusted revenue in a range of $545 million to $555 million, which would represent growth of about 43% year over year at the midpoint of its guidance. Analysts' consensus estimates had been calling for revenue of $557 million and for growth of about 44.5%, above the high end of management's forecast.

Wall Street was similarly disappointed with Square's projections for adjusted EPS: The company expects a range of $0.14 to $0.16, up between 8% and 23% year over year. Analysts had been expecting adjusted EPS of $0.19, though those expectations have moderated over the past three months, with consensus estimates now calling for $0.16.

However, investors failed to fully appreciate that Square raised its full-year guidance to a range of $4.41 billion to $4.47 billion, up from its previous guidance of $4.35 billion to $4.41 billion. This would represent year-over-year growth of 43% at the midpoint of its guidance. Management maintained its adjusted EPS forecast of between $0.74 and $0.78.

While I'll be watching guidance, those who have followed Square for some time will know that the company has a long history of providing conservative forecasts. Square is making all the right moves to continue its torrid growth well into the future.

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.