Block (SQ) Stock Could Be 16% Undervalued Despite Fresh Buy Rating News
Block stock has staged a recovery in the short term. However, after a roughly 69.2% decline over the past 5 years, its valuation signals are split, with the Excess Returns intrinsic value estimate pointing to some upside while traditional earnings multiples lean expensive and the broader checks are cautious.
- Block shares have fallen about 69.2% over the past 5 years, so the long term track record is still weak even after recent gains.
- Recent positive analyst ratings and revenue growth expectations can support the intrinsic value case, although ongoing GAAP net losses remain a key risk for how the market prices the stock.
- Block currently passes only 1 of 6 valuation checks, which suggests that on the whole it does not screen as a clear bargain despite the intrinsic value model indicating it may be undervalued.
The issue now is whether investors should give more weight to the Excess Returns intrinsic value estimate or to the richer market multiples and low overall value score when judging Block at its current price.
Is Block a Bargain on Excess Returns?
The Excess Returns model for Block starts from what the company can earn on its equity above its cost of capital, then converts that into a per share value today.
For Block, the inputs are based on available estimates. Book value sits at $36.48 per share, while stable EPS is estimated at $5.47 per share, based on future return on equity estimates from 9 analysts. The model uses a cost of equity of $3.37 per share and an excess return of $2.10 per share, with an average return on equity of 12.09%. Stable book value is projected at $45.21 per share using estimates from 7 analysts.
Under these inputs, the Excess Returns framework produces an intrinsic value estimate of $98.91 per share, which is 16.0% above the current price cited in the model. Recent buy ratings and revenue growth commentary are used to support these return assumptions even as Block continues to report GAAP net losses.
On this model, Block stock appears undervalued relative to its estimated intrinsic value.
Our Excess Returns analysis suggests Block is undervalued by 16.0%. Track this in your watchlist or portfolio, or discover 49 more high quality undervalued stocks.
Does Block Look Pricey on Earnings?
The P/E ratio suits Block because earnings-based valuation is a common anchor for mature and emerging financial technology businesses once they move toward consistent profitability.
Block trades on a P/E of about 61.9x, which is higher than the Diversified Financial industry average of 15.4x and also above the peer group average of 12.4x. The tailored fair P/E ratio for Block is 28.7x based on its profile, so the current multiple sits at more than double that indicative level. That gap suggests investors are paying a rich price per dollar of earnings relative to both industry norms and what the fair ratio model implies.
Recent buy ratings and revenue growth commentary have supported sentiment around Block. However, on a pure P/E view the stock still screens as expensive compared with peers and the fair ratio benchmark.
On the current P/E multiple, Block stock appears overvalued compared with both its industry and the modelled fair ratio.
See what the numbers say about this price — find out in our valuation breakdown.
The Block Narrative: What Would Justify Today's Price?
Simply Wall St Narratives for Block pick up where this valuation puzzle leaves off. They spell out which assumptions about Block's future growth, margins and earnings would need to be true for the stock to be worth materially more or materially less than today's price, and they sit on Simply Wall St's Community page. Each narrative ties a specific potential catalyst and risk mix to its own fair value view so you can watch over time which version of events appears closer to reality.
Community views on Block sit far apart, with one camp focused on product momentum and another zeroing in on regulatory and competitive pressure.
Bull case: 8% undervalued
"Accelerated product launches, embedded banking, and cryptocurrency integration are driving user growth, deeper engagement, and expansion into higher-margin revenue streams..."
Read the full Bull Case to see why Block could be undervalued
Bear case: 16% overvalued
"Expanding regulatory pressures, cyber threats, and dependence on cryptocurrency inflows add cost burdens and amplify earnings volatility for Block..."
Read the full Bear Case to see why Block could be overvalued
Do you think there's more to the story for Block? Head over to our Community to see what others are saying!
The Bottom Line
Block sits in a valuation tug of war. The Excess Returns intrinsic value estimate points to the stock trading at a discount, yet the current P/E suggests it is priced richly compared with both peers and a tailored fair ratio. That split reflects a clash between what the fundamentals could support if execution improves and what the market is already paying for growth and sentiment today. The key question from here is whether Block can convert its product and revenue story into durable earnings that justify the higher multiple, rather than the market proving correct that the apparent discount is a value trap.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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