I am neutral on Square Inc . Square Inc (NYSE:) is a strong company with a high growth rate and bullish Wall Street consensus. However, its valuation is very expensive.

Square was established in 2009 by Jack Dorsey, Jim McKelvey, and is a mobile payment and financial services firm.

Square has millions of users today. They offer the largest POS system on the market as well as payment hardware and financial services. (See Square stock charts on TipRanks)

Strengths

Square recently struck an acquisition deal worth $29 billion with Afterpay, an Australian consumer lending company, which is the biggest acquisition Square has ever made.

TIDAL is a global subscription-based streaming music service. The majority of the company’s shares were also purchased. These acquisitions strengthen Square’s competitive advantage by increasing its network size, as well as its capabilities.

The company’s mobile payment service, Cash App, has seen increased interest from customers who use the platform to instantly send Bitcoins, direct deposit paychecks, and benefit from more functions.

Recent Results

Square reported total net revenue worth $4.7 billion in the second quarter of 2021, showing a 143% gain over a year-over-year basis.

The company’s total net revenue in the second quarter, after excluding , was $2 billion, showing an increase of 87% from the second quarter of 2020.

Meanwhile, the company’s gross profit was reported at $1.1 billion (up 91% year-over-year), transaction-based revenue was $1.2 billion (up 80% year-over-year), and transaction-based gross profit was $543 million (up 85% year-over-year).

Due to its multiple services and products, Square faces strong competition in the consumer app and small-business markets. The rivalry with PayPal (NASDAQ:) is likely to heat up in the second quarter 2021.

Square is expecting strong year-overyear growth in gross profits from its Cash App and Seller App over the next few months.

Valuation Metrics

Square stock looks pretty expensive at present, with a forward P/E ratio of 137.5x.

Normalized earnings per shares are increasing rapidly. 2021 normalized earning per share is expected to increase by 123% and 2022 normalized earning per share by 23.1%, respectively.

Wall Street’s Take

From Wall Street analysts, Square earns a Moderate Buy analyst consensus based on 18 Buy ratings, four Hold ratings, and one Sell rating in the past three months. The upside potential of Square is 19.4%, according to the $313.38 average SQ price target.

Bottom Line

Square is enjoying rapid growth, and has fairly strong support from Wall Street analysts. However, this stock trades with a high P/E ratio. It will need to grow quickly for several years to make its current multiple worth it.

Disclosure: Samuel Smith didn’t hold any positions in any securities at the time this article was written.

Disclaimer: This article is solely the author’s opinion and does not reflect the opinions of TipRanks and its affiliates. It should only be used for informational purposes. TipRanks cannot guarantee the reliability, completeness or accuracy of any information. The article does not constitute a solicitation or recommendation to buy or sell securities. This article is not intended to provide advice on legal, investment or financial matters. TipRanks, its affiliates, disclaim any liability or responsibility in relation to the contents. You are responsible for your actions based upon the articles. TipRanks and its affiliates do not endorse or recommend this link. The past performance of TipRanks or its affiliates is not an indication of future prices, results, or performances.