In a digital world of online transactions, has this ‘boring’ company shown it can compete, or is Bill.com a stock to stay away from for now?
Nov. 14, 2020
Almost a year since its IPO in December 2019, and Bill.com (NYSE: BILL) has spent its first year as a public company in a world of utter madness. In addition, the need to prove itself as a company worth both investors’ time and money has been very much heightened, particularly after a few naysayers questioned the profitability of this stock.
Yet, there are many positives to be said about Bill.com’s performance over the last year, therefore, we ask if this stock is a good buy right now.
The bull case for Bill.com
Bill.com has been one of the best-performing financial stocks throughout COVID-19. As a company that provides financial operational support to small and mid-sized businesses, it would be logical to say that it would be a business that might suffer during a pandemic induced economic downturn. However, the automated nature of its services has instead allowed business owners to forget the stress of dealing with cash flow and allowed them to instead focus upon making the move to e-commerce or shoring up plans to help see them through the current era of volatility.
In its most recent earnings report, the company posted a 27% increase year-over-year (YoY) in customer growth, to 103,600 customers. Alongside this, the number of transactions has increased to 6.3 million with a total payment volume of $28.8 billion in the last quarter alone.
Part of Bill.com’s business model is that it charges fees on these transactions, which amount to a total of $0.49 per transaction for online payments and invoices. Furthermore, the company is also a subscription platform, thus it receives regularly recurring revenue. These revenue streams generated $43.7 million out of total revenue of $46.2 million for the quarter. With revenue up 31% YoY, Bill.com seems to be doing remarkably well after spending its first year as a public company dealing with a global pandemic.
The bear case for Bill.com
Bill.com might seem like it is a safe bet after performing so well over the past year, however, like most high growth, stocks there are some risks involved when investing in this company.
For the past two quarters, although reporting slight revenue growth, this has begun to decelerate with estimates of $186 million in revenue for 2021, a 19% YoY change. This could spell problems in the future, particularly as the company continues to burn through cash.
Additionally, Bill.com has some fierce competition from big companies such as Stripe, Paypal, and Square. Trying to carve out market share in an increasingly busy digital payments market will require a lot of business savvy. But things on this front are not all bad as Bill.com has managed to make deals with a couple of well-known names such as Mastercard and American Express. By making these deals pre-IPO it shows that long-established banks and financial organizations are willing to take the risk of partnering up with Bill.com
So, should I invest in Bill.com?
The short answer is yes. The long answer takes into consideration the cash burn rate and the competitiveness of the industry, but ultimately the answer would be yes as well. As with most newly public companies, the test of its business comes hard and fast, but none more so than with Bill.com. The fact that it has been one of the best performing financial stocks during COVID-19, says more about the strength of the company than anything else.
Investors would do well to include this stock at the very least in their watchlist, if not their portfolio.
Quickfire Round
- Where is bill.com located?
Bill.com has two offices, its headquarters are based in Palo Alto, California; its other office is based in Houston, Texas
- How long does it take to process payments with Bill.com?
For all new accounts a payment history needs to be built, this means that when first starting up with Bill.com it can take up to 4 banking days to process payments
- What are the price differences between PayPal and Bill.com?
Paypal will charge 2.9% + $0.30 for each transaction, which means that on a $1000 invoice PayPal takes $29.30 and the customer $970.70. Bill.com only charges $0.49 per ACH transaction which presents a cheaper alternative for many who use its services.
MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here.