BlackLine vs. Bill.com: Which Fintech Stock Is a Better Buy?

The COVID-19 pandemic has acted as a significant tailwind for companies part of the fintech industry. The demand for digital-based payment tools and solutions increased multifold as enterprises all over the world had to pivot towards a work from home model.

These macro-economic trends have benefitted several companies that include BlackLine and Bill.com. BlackLine (BL) went public back in October 2016 and has since returned close to 350% to investors. Comparatively, Bill.com (BILL) was listed on the NYSE in December 2019 and is up 560% in the last two years.

However, the two stocks have also lost steam in recent months as BlackLine has fallen by 30% from all-time highs while Bill.com is down 26%. Today I’ll analyze and compare both of these fintech growth stocks to see which is currently the better investment.

The bull case for BlackLine

BlackLine provides cloud-based solutions to automate and streamline accounting and finance operations. Further, it is integrated with all major ERP providers that include SAP and Oracle. In Q3 of 2021, BlackLine increased its customer account by 15% year over year to 3,704%.

The company launched four new products and expects them to account for $800 million in annual recurring revenue from existing customers, allowing BlackLine to grow its sales by 200% without the addition of new customers. Its net dollar retention rate in Q3 stood at 108% which suggests existing customers increased spending by 8% on its platform.

BlackLine’s international sales rose by 41% year over year in Q3, accounting for 28% of total revenue, up from 25% in the year-ago period. Total sales in Q3 grew by 21% year over year on the back of strong subscription and support revenue which was up 23%.

The company generated a net income of $15.1 million, operating cash flow of $17.1 million, and free cash flow of $9.8 million in the quarter.

The bull case for Bill.com

Valued at a market cap of $26.5 billion, Bill.com provides cloud-based software that automates back-office financial operations for small and medium businesses. Its artificial intelligence-enabled platform creates a seamless connection between clients and users where they can manage cash flows, create expense reports and improve overall efficiency.

Bill.com has partnered with leading accounting companies in the U.S. that sell the former’s suite of products and solutions. At the end of the September quarter, 85 of the top 100 accounting firms in the U.S. have partnered with Bill.com allowing it to expand its total customer base to 127,000.

In the fiscal first quarter of 2022 that ended in September, Bill.com reported inorganic revenue growth of 164% and inorganic revenue growth of 78%. It also announced the acquisition of Invoice2go which is an accounts receivable platform as well as expense card company Divvy.

In Q1, Bill.com’s core revenue touched $116 million and the volume processed on the platform soared by 63% to $47 billion.

The verdict

BlackLine is forecast to grow its revenue to $513 million in 2022, up from $351 million in 2020. Comparatively, its earnings per share are forecast to touch $0.71 in 2022. The stock is valued at a forward price to sales multiple of 12x and a price to earnings multiple of 147x.

Bill.com is forecast to grow its revenue to $736 million in 2023, up from $238 million in 2021. Comparatively, its loss per share is forecast to touch $0.64 in 2023. The stock is valued at a forward price to fiscal 2022 sales multiple of 49x and is likely to remain unprofitable in the near term.

I believe BackLine is currently the better investment, improving profit margins and lower valuation.  And analysts predict that BackLine will rally more than 35% in 2022.

BL shares were trading at $103.35 per share on Thursday morning, down $1.21 (-1.16%). Year-to-date, BL has declined -22.51%, versus a 27.69% rise in the benchmark S&P 500 index during the same period.

Aditya Raghunath is a financial journalist who writes about business, public equities, and personal finance. His work has been published on several digital platforms in the U.S. and Canada, including The Motley Fool, Finscreener, and Market Realist.

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