Square Earnings: Rapid Growth With Even Better Long-Term Potential

Payment-processing company Square (NYSE: SQ) recently reported quarter earnings that surpassed expectations for the fifth time in a row. In addition to beating estimates on the top and bottom lines for the third quarter, Square posted impressive growth in its key business segment, and increased its full-year guidance for revenue, earnings, and more.

Here's a rundown of the highlights of Square's earnings report, and whether the stock still looks attractive at its record-high share price.

The headline numbers

Square's adjusted revenue came in at $257 million. The company earned $0.07 per share. Both metrics handily beat analysts' expectations of $244.9 million and $0.05 per share, respectively.

Total revenue grew by 33% year over year, which is even better than the 26% year-over-year growth it achieved during the previous quarter. Adjusted revenue growth was even more impressive at 45% year-over-year growth, as compared with 41% growth  in Q2. In other words, Square isn't just maintaining its impressive growth rate – its growth is accelerating.

Square had a pretty impressive quarter

Looking beyond the headline numbers, the company's Q3 was quite strong all around. Here are a few of the highlights:

• Gross payment volume came in at $17.4 billion, representing 31% annual growth and a 6% jump over last quarter.
• Subscription and service-based revenue, which includes things like Instant Deposit, Square Capital, and Caviar, grew by 84% year over year.
• Square Capital originated $303 million in small business loans, which is 45% higher than a year ago. It's worth noting, however, that this could be interpreted as a negative result, as it's a decline from Q2.
• The company launched Square Register, its first all-in-one hardware product. In other words, it doesn't require a third-party tablet or other mobile device to operate.

Perhaps most significantly, Square raised its full-year guidance thanks to the all-around strong performance.

The stock price has roughly tripled in a year – is it still worth buying?

Despite all of the good news, Square's stock price pulled back a bit in the wake of the announcement, which isn't too surprising, given the stock's amazing run lately. Investors could simply be taking some profits.

However, to be perfectly clear, this was a very strong quarter and it shows why the stock has performed so well.

I've written before that Square's market opportunity is massive, not just in terms of its core payment-processing business, but with the small-business ecosystem it is creating. If Square is successful at tapping into even a small fraction of its addressable market, the stock -- even at its current high price -- could still be a bargain for long-term investors.

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Matthew Frankel owns shares of Square. The Motley Fool owns shares of Square. The Motley Fool has a disclosure policy.