Block (XYZ) Stock May Be 19% Undervalued On Bitcoin Payments Rollout

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Block stock has delivered a decline of 69.1% over the past five years, yet the latest intrinsic value work using an Excess Returns model points to meaningful upside while traditional earnings multiples flag the shares as expensive. This leaves investors with a split valuation picture.

• Over five years, Block shareholders have seen the stock fall 69.1%. Any case for upside now relies heavily on how today’s valuation links to future cash generation rather than past returns.

• New developments such as the expanded Square partnership with OpenTable and the rollout of Bitcoin payments on Square’s point of sale can support expectations for transaction volumes and ecosystem stickiness. However, relying more on Bitcoin related activity may add volatility to how investors assess Block’s risk profile and earnings visibility.

• Block passes only 1 out of 6 valuation checks, which means the broader set of metrics leans expensive even though the Excess Returns estimate suggests the stock is undervalued by about 18.9%.

The issue now is whether Block’s recent share price around US$82.72 leaves enough margin of safety when the intrinsic value estimate and the earnings multiple view are pointing in different directions.

Block delivered 5.0% returns over the last year. See how this stacks up to the rest of the Diversified Financial industry.

Is Block Still Cheap on Excess Returns?

The Excess Returns model evaluates how much profit Block can generate above its cost of equity based on its balance sheet and forecast earnings power. For Block, the model uses a book value of $36.70 per share and a stable earnings figure of $5.62 per share, which are grounded in analyst expectations for a future return on equity of 12.32%. With a cost of equity estimated at $3.45 per share, the implied excess return is $2.17 per share on a stable book value that is projected to move toward $45.62 per share.

On these inputs, the Excess Returns model points to an intrinsic value of about $102 per share. That is above the recent share price around $82.72, which implies a discount of roughly 18.9% and indicates the market is valuing Block below the level supported by these excess return assumptions. Because the launch of Bitcoin payments on Square’s point of sale can influence how investors view Block’s risk profile, this discount may reflect caution around the stability of future returns.

Source: sg.finance.yahoo.com