Simple Investment Opportunity: Affordable Growth Share to Acquire with $500, with a Long-Term Perspective
Bill.com (-0.77% as BILL) is a business software company that caters to small and medium-sized enterprises (SMEs), assisting them in streamlining their accounting and expense management processes. The company had its initial public offering in December 2019 at $22 per share and experienced a remarkable surge of 1,418% within two years, peaking at an all-time high of $334.
The economic climate during this period was conducive due to low-interest rates, enabling Bill to invest heavily in expanding its customer base and revenue, even if it led to financial losses. With the interest rates reversing, Bill then shifted its focus to decreasing expenses, fostering sustainable growth, and generating profits.
Following 2021, Bill.com's stock started to lose altitude, trading 74% below its all-time high. However, the stock managed to rebound from its 52-week low of $43. It recently reported its financial results for the first quarter of fiscal 2025 (ending September 30), exhibiting accelerating revenue growth and skyrocketing profits.
Investors with a spare $500 (not required for immediate expenses) might find interest in allocating this sum to Bill.com shares due to the following reasons:
Expanding suite of tools for SMEs
Small business proprietors typically handle tasks like marketing, product development, bookkeeping, and daily operations themselves. The software designed by Bill.com is intended to save time by optimizing the accounts payable, accounts receivable, and expense management processes.
The company's flagship product is a cloud-based digital inbox that consolidates incoming invoices, eliminating messy paper trails. This inbox automatically routes each invoice to the relevant individual for approval, allowing for a single click to process payments. Furthermore, the transactions are logged in the books due to integrations with most accounting software platforms.
Bill.com also owns Invoice2go, which enables businesses to generate and send invoices rapidly, as well as track incoming payments. In addition, the company offers invoice financing, enabling businesses to unlock cash flow even when clients fail to pay on time. Invoice financing was introduced by Bill.com less than a year ago and has already funded over 200,00 loans.
Presently, Bill.com serves over 476,200 SME customers across its product portfolio. New customers are acquired directly and through its network of more than 8,500 accounting firms, which are incentivized to recommend Bill's software due to its efficiency in making their jobs simpler.
Since 2018, Bill.com has processed over $1 trillion in transaction volume for its clients, making it one of the world's largest business-to-business payment platforms. Despite this, it has a considerable growth potential, as it only represents a small fraction of the $125 trillion in global payments processed annually by over 70 million SMEs.
Revenue growth accelerating
Bill recorded $358.5 million in total revenue during the first quarter, marking an 18% increase from the previous year and surpassing management's guidance of $351 million. This growth rate also marked a significant acceleration from the previous quarter, when total revenue increased by 16%.
Management then raised its full-year revenue forecast for fiscal 2025 from $1.432 billion at the midpoint to $1.451 billion due to Bill's impressive revenue growth.
The company managed to accelerate its revenue growth while simultaneously cutting its operating expenses by 1.3% during the first quarter compared to the previous year. This was primarily due to decreases in administrative and research and development expenses. Contrary to convention, cost reductions often lead to slower revenue growth, indicating strong organic demand from customers for Bill's services.
The combined effect of faster revenue growth and lower expenses allowed more money to flow to the bottom line as profit. As a result, Bill delivered $8.9 million in GAAP net income, a significant improvement from the $27.8 million net loss reported during the same quarter the previous year. GAAP net income represents true profitability, making this an excellent result for investors.
However, the company also delivered a strong result without considering non-GAAP expenses like stock-based compensation, generating $68.6 million in non-GAAP net income, representing a 33.2% year-over-year increase.
Bill.com stock appears undervalued
As noted earlier, Bill.com stock has more than doubled from its 52-week low near $43. The impressive results depicted above have played a significant role in the stock's recent rally, yet it might still be undervalued, suggesting potential for further increases.
The stock currently trades at a price-to-sales (P/S) ratio of 6.8, which is at one of its cheapest levels since Bill.com's initial public offering in 2019. Moreover, this ratio represents a 77% discount to Bill.com's average P/S ratio of 30.1 over the previous five years (which included an expensive 2021 period with a P/S ratio around 100). Therefore, although it may not return to its previous levels, the current P/S ratio indicates a potential bargain in light of recent revenue acceleration and an upward revision to the company's fiscal 2025 forecast.
Bill.com's vast potential market could set the stage for decades of expansion. Moreover, plummeting interest rates might function as a beneficial breeze for the organization, considering that small enterprises frequently depend on debt to fuel their expansion. Increased growth leads to higher transaction volumes, which in turn results in higher fees for Bill.com, and this is primarily how they generate income.
As a result, this could be an excellent opportunity to acquire the stock, particularly for investors with a lengthy holding period of five to ten years (or longer).
- Given the large potential market for Bill.com's services and the low-interest environment, which often encourages small enterprises to take on debt for growth, investing in Bill.com shares could be a strategic move for those seeking long-term growth opportunities in the finance sector.
- With its expanding suite of tools for SMEs, such as invoice financing and streamlined account management, Bill.com is not only attracting new customers but also generating significant revenue growth. This financial performance, combined with an undervalued stock price, makes it an appealing option for investors seeking to allocate money in the money and investing space.
