What happened
Bill.com (BILL 2.96%) was a big winner last year as the back-office financial specialist posted strong results and benefited from its acquisition of Divvy. During a year when software-as-a-service stocks largely underperformed the market after skyrocketing in 2020, Bill.com bucked than trend thanks to the pandemic recovery and an increase in transactions.
According to data from S&P Global Market Intelligence, the stock finished the year up 83%. As you can see from the chart below, the stock jumped after all four of its earnings reports before cooling off toward the end of the year in a broad-based sell-off in growth stocks.
So what
Bill.com came into the year trading at a lofty valuation, but consistently topped expectations nonetheless.
Following a blowout fiscal second-quarter 2021 earnings report, the stock jumped 32% on Feb. 5. The company reported a 59% increase in core revenue, which doesn't include the interest earned from holding payments. Total revenue was up 38% to $54 million, which smashed estimates of $47.1 million. Total payment volume increased 40% to $35 billion, and transaction fees nearly doubled as the company benefited from increasing payments.
Image source: Getty Images.
In the following report, the stock jumped by 18% after the company said it was going to acquire Divvy, a leader in spend management for small and medium-sized businesses, and posted another strong round of results. Growth accelerated in the fiscal third quarter with core revenue up 62%, while total revenue increased 45% to $59.7 million, ahead of estimates of $54.6 million. It also posted a narrower loss than expected.
In late August, the stock jumped by another 29% after Bill.com reported 86% revenue growth to $78.3 million, helped by the addition of Divvy for part of the quarter. Once again, the company smashed top-line estimates of $62.1 million, earning another round of cheers from the market. It also announced the acquisition of Invoice2Go, which provides workflow software for small businesses and freelancers.
Finally, the stock climbed yet again in its final earnings report of the year, gaining 14% as it trounced estimates. However, those gains would be short-lived as the stock dove over the last two months of the year amid broader pressure on high-priced growth stocks.
Now what
Bill.com has continued to fall sharply through the first three trading sessions of 2022, losing nearly 20% as investors continue to rotate out of high-priced stocks. After Federal Reserve minutes revealed on Wednesday that the central bank could hike interest rates even faster than expected, the Nasdaq fell more than 3%, taking down Bill.com with it.
Even after declining roughly 40% from its peak in November, the stock trades at a price-to-sales ratio of nearly 40 based on this year's expected revenue. That means the stock could have further to fall despite its strong results.
