Bill.com (NYSE: BILL) is a business software company that helps small and medium-sized businesses (SMBs) streamline their accounting and expense management workflows. The stock went public in December 2019 at $22 per share, and in less than two years it had risen 1,418% to an all-time high of $334.
Capital was cheap at the time thanks to historically low interest rates, so Bill invested heavily in growing his customer base and revenues, even if it ultimately led to losses. Those conditions have since reversed, so the company shifted its focus to spending less, growing more sustainably and generating profits.
As a result, Bill.com stock lost highs after 2021. It is currently trading 74% below its all-time high but has recovered from its 52-week low of $43. The company just announced its financial results for the first quarter of fiscal 2025 (ending September 30), and has achieved accelerating revenue growth and rising profits.
This is why investors with an extra $500 — money not needed for immediate expenses — might want to allocate it to Bill.com stock.
A growing portfolio of software tools for SMEs
Small business owners often handle their own marketing, product development, accounting, and day-to-day operations. Bill.com’s software is designed to save time by streamlining accounts payable, accounts receivable and expense management processes.
Bill.com’s flagship product is a cloud-based digital inbox that collects incoming invoices to eliminate cluttered paper trails. Each invoice is forwarded to the relevant person for approval, after which it can be paid with one click. Additionally, thanks to integrations with most accounting software platforms, every transaction is automatically recorded in the books.
Bill.com also owns Invoice2go, which allows businesses to quickly create and send invoices and track incoming payments. The company offers invoice financing so businesses can free up cash flow even if their customers don’t pay on time. Bill.com launched invoice financing less than a year ago and has already financed more than 200,000 loans.
At the end of the first quarter, Bill served a record 476,200 SMB customers across its product portfolio. It recruits clients directly, but also through its network of more than 8,500 accounting firms. These firms recommend Bill’s software to their business clients because it makes their jobs much easier, making it a win-win for everyone involved.
Bill has processed more than $1 trillion in transaction volumes on behalf of its customers since 2018, making it one of the largest business-to-business payment platforms in the world. However, that’s just a drop in the bucket compared to the $125 trillion in payments processed by more than 70 million SMBs worldwide, so the company has significant runway for long-term growth.
Image source: Getty Images.
Accelerating sales growth
Bill generated a record total revenue of $358.5 million during the first quarter, an increase of 18% over the same period last year, and well above management’s high expectations ($351 million). That growth rate also marked an acceleration from the previous quarter three months earlier, when total revenue rose 16%.
The strong performance prompted management to raise full-year revenue guidance for fiscal 2025 from $1.432 billion at the midpoint to $1.451 billion.
Bill’s accelerating revenue growth was impressive considering the company itself reduced operating costs increased by 1.3% in the first quarter compared to the same period last year, driven by lower administration and research and development costs. Cost cuts typically lead to slowing revenue growth, so Bill’s first quarter result suggests strong organic customer demand.
Faster sales growth combined with lower costs ensured that more money flowed to the operating result as profit. As a result, Bill generated $8.9 million in GAAP net income, which was a big change from $27.8 million in net income. loss it delivered in the same quarter last year. GAAP net income is considered true profitability, so this was a great result for investors.
But the company also delivered strong results on a non-GAAP basis, which excludes one-time and non-cash expenses such as stock-based compensation. Bill generated $68.6 million in non-GAAP net income, up 33.2% year over year.
Bill.com stock looks cheap relative to its history
As I noted at the top, shares of Bill.com have nearly doubled from their 52-week low of around $43. The strong results highlighted above are a major reason for the recent rally, but the stock could still can still be quite cheap, meaning there is even more upside potential ahead.
The stock is currently trading at a price-to-sales ratio (P/S) of 6.8, which is near the cheapest level since the company went public in 2019. That’s also a 77% discount to the average P/S ratio of 30.1 compared to the past five years:
BILL PS Ratio data according to YCharts
That average includes the period of 2021 when Bill.com stock was trading at a price-to-earnings ratio of around 100, which was undoubtedly expensive. Therefore, I am not suggesting that rates will return to 30.1, but the current level seems cheap given the recent acceleration of the company’s sales and the upward revision of the 2025 budget forecast.
Bill.com’s huge addressable market could pave the way for years of growth from here on out. Additionally, falling interest rates can be a tailwind for the company, as small businesses often rely on debt to fuel their growth. More growth can lead to greater payment volume, which translates into more fees for Bill.com, which is how the company generates most of its revenue.
Therefore, this could be a good time to buy the stock, especially for investors who can hold it for the long term of five to ten years (or longer).
Should You Invest $1,000 in Bill Holdings Now?
Consider the following before purchasing shares in Bill Holdings:
The Motley Fool stock advisor The analyst team has just identified what they think is the 10 best stocks for investors to buy now… and Bill Holdings wasn’t one of them. The ten stocks that survived the cut could deliver monster returns in the coming years.
Think about when Nvidia made this list on April 15, 2005… if you had $1,000 invested at the time of our recommendation, you would have $870,068!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including portfolio building guidance, regular analyst updates, and two new stock picks per month. The Stock Advisor is on duty more than quadrupled the return of the S&P 500 since 2002*.
View the 10 stocks »
*Stock Advisor returns November 11, 2024
Anthony Di Pizio has no positions in the stocks mentioned. The Motley Fool holds and recommends positions in Bill Holdings. The Motley Fool has a disclosure policy.
