What is SQ's Intrinsic value?

Square Inc (SQ) Intrinsic Value Analysis

Executive Summary

As of April 1, 2026, Square Inc's estimated intrinsic value ranges from $8.96 to $258.21 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $258.21 +196.9%
Discounted Cash Flow (5Y) $99.64 +14.6%
Dividend Discount Model (Multi-Stage) $117.35 +34.9%
Dividend Discount Model (Stable) $37.09 -57.3%
Earnings Power Value $8.96 -89.7%

Is Square Inc (SQ) undervalued or overvalued?

With the current market price at $86.96, the stock appears to be significantly undervalued.

Understanding Intrinsic Value

Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate Square Inc's intrinsic value, including:

  1. Discounted Cash Flow (DCF): Values the company based on projected future cash flows
  2. Dividend Discount Model (DDM): Values the company based on expected future dividend payments
  3. Earnings Power Value (EPV): Values the company based on its current earnings power, assuming no growth

Weighted Average Cost of Capital (WACC)

The cost of capital is a critical factor in valuation models, representing the required return for investors.

WACC Component Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.74 1.07
Cost of equity 7.3% 10.9%
Cost of debt 4.0% 4.5%
Tax rate 1.2% 1.7%
Debt/Equity ratio 0.11 0.11
After-tax WACC 7.0% 10.3%

Valuation Methods

1. Discounted Cash Flow (DCF) Valuation

Our DCF model projects cash flows over 5-year and 10-year horizons, with the following key assumptions:

  • Forecast Period: 5-year DCF and 10-year DCF
  • Terminal Growth Rate: 0.0% (range: 3.0% - 5.0%)
  • Discount Rate: 8.6% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $21,916 (FY12-2023) to $102,262 (FY12-2033)
  • Net profit margin expansion from 0% to 17%
  • Capital expenditures maintained at approximately 1% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $100 $60,525M 86.5%
10-Year Growth $258 $158,812M 75.4%
5-Year EBITDA $65 $38,985M 79.0%
10-Year EBITDA $151 $92,505M 57.8%

2. Dividend Discount Model (DDM)

The DDM values a company based on its expected future dividend payments. We used two approaches:

Multi-Stage DDM:

  • Current payout ratio: 0.0%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 9.1%
  • Long-term growth rate: 3.5%
  • Fair value: $117.35 (34.9% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 10.9% (Low) to 7.3% (High)
  • Long-term growth rate: 2.5% (Low) to 4.5% (High)
  • Fair value range: $15 to $59
  • Selected fair value: $37.09 (-57.3% from current price)

3. Earnings Power Value (EPV)

EPV assesses a company's value based on its current normalized earnings power, assuming no growth.

EPV Component Value
Normalized Earnings $359M
Discount Rate (WACC) 10.3% - 7.0%
Enterprise Value $3,496M - $5,151M
Net Debt $(1,232)M
Equity Value $4,727M - $6,383M
Outstanding Shares 620M
Fair Value $8 - $10
Selected Fair Value $8.96

Key Financial Metrics

Metric Value
Market Capitalization $53899M
Enterprise Value $52667M
Trailing P/E 47.74
Forward P/E 70.69
Trailing EV/EBITDA 7.05
Current Dividend Yield 0.00%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 0.11

Investment Decision Framework

To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:

  1. Forecast Certainty: DCF methods rely on long-term projections, while earnings power value focuses on current normalized earnings
  2. Business Model Alignment: Dividend models are more appropriate for mature companies with established dividend policies
  3. Historical Accuracy: How well each method has predicted fair value historically

Valuation Weight Matrix

Valuation Method Weight Weighted Value
Discounted Cash Flow (10Y) 30% $77.46
Discounted Cash Flow (5Y) 25% $24.91
Dividend Discount Model (Multi-Stage) 20% $23.47
Dividend Discount Model (Stable) 15% $5.56
Earnings Power Value 10% $0.90
Weighted Average 100% $132.30

Investment Conclusion

Based on our comprehensive valuation analysis, Square Inc's intrinsic value is $132.30, which is approximately 52.1% above the current market price of $86.96.

Key investment considerations:

  • Strong projected earnings growth (0% to 17% margin)
  • Consistent cash flow generation
  • Conservative capital structure (Debt/Equity of 0.11)

Given these factors, we believe Square Inc is currently significantly undervalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.