This software company has barely scratched the surface of its enormous addressable market.
Bill.com (BILL -1.96%) is an enterprise software company that helps small and mid-sized businesses (SMBs) streamline their bookkeeping and expense management workflows. Its stock came public in December 2019 at $22 per share, and in less than two years, it had soared 1,418% to an all-time high of $334.
Capital was cheap back then thanks to historically low interest rates, so Bill invested heavily in growing its customer base and its revenue, even if it resulted in losses at the bottom line. Those conditions have since reversed, so the company shifted its focus to spending less money, growing more sustainably, and generating profits.
As a result, Bill.com stock lost altitude after 2021. It’s currently trading 74% below its all-time high, but it has recovered from its 52-week low of $43. The company just released its financial results for its fiscal 2025 first quarter (ended Sept. 30), and it delivered accelerating revenue growth and soaring profits.
Here’s why investors with a spare $500 — money not needed for immediate expenses — might want to allocate it to Bill.com shares.
A growing portfolio of software tools for SMBs
Small business owners often handle their own marketing, product development, bookkeeping, and day-to-day operations. Bill.com’s software is designed to save them time by streamlining the accounts payable, accounts receivable, and expense management processes.
Bill.com’s flagship product is a cloud-based digital inbox that aggregates incoming invoices to eliminate messy paper trails. It routes each invoice to the relevant person for approval, and it can then be paid with a single click. Plus, thanks to integrations with most accounting software platforms, each transaction is automatically recorded in the books.
Bill.com also owns Invoice2go, which allows businesses to rapidly create and send invoices, and track incoming payments. The company offers invoice financing, so businesses can unlock cash flow even if their clients fail to pay on time. Bill.com launched invoice financing less than a year ago, and it has already funded more than 200,000 loans.
At the end of Q1, Bill was serving a record high 476,200 SMB customers across its product portfolio. It acquires customers directly, and also through its network of more than 8,500 accounting firms. Those firms recommend Bill’s software to their business clients because it makes their job much easier, so it’s a win-win for everybody involved.
Bill has processed more than $1 trillion worth of transaction volume on behalf of its customers since 2018, making it one of the largest business-to-business payment platforms in the world. However, that’s a drop in the bucket compared to the $125 trillion worth of payments processed globally from over 70 million SMBs, so the company has a significant runway for long-term growth.
Image source: Getty Images.
Accelerating revenue growth
Bill generated a record $358.5 million in total revenue during Q1, which was an 18% increase from the year-ago period, and it was comfortably above the high end of management’s guidance ($351 million). That growth rate also marked an acceleration from the previous quarter three months earlier, when total revenue increased by 16%.
The strong result prompted management to increase its full-year revenue forecast for fiscal 2025 from $1.432 billion at the midpoint to $1.451 billion.
Bill’s accelerating revenue growth was impressive considering the company actually reduced its operating expenses by 1.3% during Q1 compared to the year-ago period, led by lower admin and research and development costs. Cost cuts typically lead to slowing revenue growth, so Bill’s Q1 result suggests it’s experiencing strong organic demand from customers.
Faster revenue growth combined with lower expenses allowed more money to flow to the bottom line as profit. As a result, Bill generated $8.9 million in GAAP net income, which was a big swing from the $27.8 million net loss it delivered during 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 a strong result on a non-GAAP basis, which excludes one-off and non-cash expenses like stock-based compensation. Bill generated $68.6 million in non-GAAP net income, which was a 33.2% year-over-year jump.
Bill.com stock looks cheap relative to its history
As I touched on at the top, Bill.com stock has almost doubled from its 52-week low near $43. The strong results highlighted above are a key reason for the recent rally, but the stock might still be quite cheap, which means there could be further upside ahead.
The stock currently trades at a price-to-sales (P/S) ratio of 6.8, which is near the cheapest level since the company came public in 2019. That’s also a 77% discount to its average P/S ratio of 30.1 over the last five years:
BILL PS Ratio data by YCharts
That average includes the 2021 period when Bill.com stock traded at a P/S ratio of around 100, which was unquestionably expensive. Therefore, I’m not suggesting it will get back to 30.1, but the current level appears cheap given the recent acceleration in the company’s revenue, and the upward revision to its fiscal 2025 forecast.
Bill.com’s enormous addressable market could pave the way for years’ worth of growth from here. Plus, falling interest rates could be a tailwind for the company, because small businesses tend to rely on debt to fuel their growth. More growth can drive more payment volume, which translates into more fees for Bill.com, and that’s how the company generates most of its revenue.
Therefore, now might be a great time to buy the stock, especially for investors who can hold on for a long-term period of five to 10 years (or more).
