BILL trades at $44.21 and has moved in lockstep with the market. Its shares have returned 18.7% over the last six months while the S&P 500 has gained 21.4%.
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Why Is BILL Not Exciting?
We’re passing on BILL for now. Here are three reasons why there are better opportunities than BILL, plus one stock we’d rather own.
1. Weak Billings Point to Soft Demand
Billings is a non-GAAP metric that is often called “cash revenue” because it shows how much money the company has collected from customers in a certain period. This is different from revenue, which must be recognized in pieces over the length of a contract.
BILL’s billings came in at $434.2 million in Q2, and over the last four quarters, its year-on-year growth averaged 12.7%. This performance was underwhelming and suggests that increasing competition is causing challenges in acquiring/retaining customers. 
2. Projected Revenue Growth Is Slim
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect BILL’s revenue to rise by 10.7%, a slight deceleration versus its 47.3% annualized growth for the past five years. This projection is underwhelming and indicates its products and services will face some demand challenges.
3. Operating Margin Rising, Profits Up
While many software businesses point investors to their adjusted profits, which exclude stock-based compensation (SBC), we prefer GAAP operating margin because SBC is a legitimate expense used to attract and retain talent. This is one of the best measures of profitability because it shows how much money a company takes home after developing, marketing, and selling its products.
Over the last two years, BILL’s expanding sales gave it operating leverage as its margin rose by 1.1 percentage points. Its operating margin for the trailing 12 months was negative 4.4%, and it must keep making strides to one day reach sustainable profitability.
Final Judgment
BILL isn’t a terrible business, but it doesn’t pass our bar. That said, the stock currently trades at 2.4× forward price-to-sales (or $44.21 per share). While this valuation is fair, the upside isn’t great compared to the potential downside. We’re pretty confident there are superior stocks to buy right now. We’d suggest looking at the most entrenched endpoint security platform on the market.
Stocks We Like More Than BILL
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