Reviewing Square (SQ) and Twilio (TWLO)

Square (NYSE: SQ) and Twilio (NYSE:TWLO) are both mid-cap application software companies, but which is the superior investment? We will contrast the two companies based on the strength of their analyst recommendations, risk, valuation, earnings, profitability, institutional ownership and dividends.

Institutional and Insider Ownership

53.2% of Square shares are held by institutional investors. Comparatively, 57.8% of Twilio shares are held by institutional investors. 32.7% of Square shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.

Profitability

This table compares Square and Twilio’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Square -3.04% -7.98% -3.18%
Twilio -15.69% -17.72% -14.19%

Earnings & Valuation

This table compares Square and Twilio’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Square $1.71 billion 8.98 -$171.59 million ($0.17) -235.18
Twilio $277.33 million 8.75 -$41.32 million ($0.73) -36.16

Twilio has higher revenue, but lower earnings than Square. Square is trading at a lower price-to-earnings ratio than Twilio, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a breakdown of recent ratings and recommmendations for Square and Twilio, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Square 0 13 19 0 2.59
Twilio 1 2 13 0 2.75

Square currently has a consensus target price of $31.75, indicating a potential downside of 20.59%. Twilio has a consensus target price of $37.14, indicating a potential upside of 40.69%. Given Twilio’s stronger consensus rating and higher possible upside, analysts plainly believe Twilio is more favorable than Square.

Summary

Square beats Twilio on 8 of the 12 factors compared between the two stocks.

About Square

Square, Inc. (Square) is a commerce ecosystem. The Company enables its sellers start, run and grow their businesses. It combines software with hardware to enable sellers to turn mobile devices and computing devices into payments and point-of-sale solutions. Once a seller downloads the Square Point of Sale mobile application, they can take their first payment. With its offering, a seller can accept payments in person via magnetic stripe (a swipe), Europay, MasterCard, and Visa (EMV) (a dip), or Near Field Communication (NFC) (a tap); or online via Square Invoices, Square Virtual Terminal, or the seller’s Website. Once on its system, sellers gain access to technology and features, such as reporting and analytics, next-day settlements, digital receipts, payment dispute management and chargeback protection, and Payment Card Industry (PCI) compliance. On the consumer (buyer) side, Square Cash offers individuals access to a way to send and receive money.

About Twilio

Twilio Inc. offers Cloud Communications Platform, which enables developers to build, scale and operate real-time communications within software applications. The Company’s platform consists of Programmable Communications Cloud, Super Network and Business Model for Innovators. Its Programmable Communications Cloud software enables developers to embed voice, messaging, video and authentication capabilities into their applications through its Application Programming Interfaces (APIs). Its Programmable Communications Cloud offers building blocks that enable its customers to build what they need. Its Programmable Communications Cloud includes Programmable Voice, Programmable Messaging, Programmable Video and Use Case APIs. The Super Network is its software layer that allows its customers’ software to communicate with connected devices globally. It interconnects with communications networks around the world.

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