From March 15, 2018, through March 11, 2025, shares of financial technology (fintech) stock Block (XYZ -3.33%) were up less than 1%. Granted, the stock was up more than 400% at one point during this stretch of time. However, it's plunged 80% from 2021 highs and has shown no signs of recovering.

Two things have happened for Block during these seven long, futile years. First, the company's trailing-12-month revenue has skyrocketed nearly 900%, which is impressive. But the stock's valuation has plunged, which means that its growth has done absolutely nothing to move the needle for shareholders.

Block's chart below illustrates this. Revenue is way up, but the price-to-sales (P/S) ratio is way down.

XYZ Revenue (TTM) data by YCharts

As of this writing, Block stock has dropped to a P/S ratio of just 1.5, which is objectively inexpensive. But the question is, why has this happened?

There are two primary possibilities for explaining the cheap valuation of Block stock. The first is that investors have no confidence in the company's ability to grow from here. In other words, its revenue may be up 900% during the past seven years, but that doesn't mean anything for the future. The second possibility is that investors aren't impressed with the way in which Block has grown or will grow.

Allow me to explain how those two things can affect a stock's valuation. Let's assume that a company fails to grow during the next five years or even risks getting smaller. In that scenario, the company would rightly be worth less today than a company that was expanding.

For the other scenario, let's assume that a company expands a low-margin business segment at the expense of a high-margin business unit. Investors wouldn't appreciate that growth as much, and they would place a lower value on that company than on a company doing the opposite.

Therefore, I believe that investors are thinking about one of these two things, and that is keeping them from investing in Block stock. However, I believe both assumptions are faulty.

Why assumptions about Block stock may be faulty

I don't believe that investors should worry about Block's future growth; all of its business metrics are healthy enough to suggest  upside.

More than half of Block's gross profit in 2024 was from its Cash App ecosystem. That part of the business, for example, showed strength across the board. It now has 57 million monthly active users, and a record 44% of them now use the Cash App card, which increases activity. Furthermore, Cash App inflows increased 14% in 2024 to a record $283 billion.

In short, this is the largest part of the business, and adoption trends are still positive. Other parts of the business are growing as well. For this reason, I wouldn't be surprised if Block is a much bigger business five years from now.

Additionally, Block isn't growing at the expense of profit margins. In fact, it may just now be reaching an inflection point for profit-margin widening.

The chart below shows that during the past five years, Block's revenue, gross profit, and free cash flow (what's left of cash flow after capital spending) have all grown at comparable rates. Granted, free cash flow has been less consistent than the other metrics. But it's still up by about the same amount, nevertheless.

XYZ Revenue (TTM) data by YCharts

For 2025, Block expects to increase gross profit by at least 15%. Moreover, management expects its adjusted operating margin to widen in both this year and in 2026. So, it would seem that Block is poised for revenue growth and expanding profit margins. All of this makes the stock look like a steal at just 1.5 times sales.

Why I'm nevertheless nervous about Block stock

Block's growth initiatives aren't hurting margins. However, its newer business ideas don't particularly excite me as a shareholder, which is why I'm reluctant to buy more shares even at what seem to be attractive prices.

For example, Block's self-custody Bitcoin wallet Bitkey and its Proto Bitcoin mining business are interesting, but I can't see how focusing energy on these things helps its overall business.

For another example, Block's Cash App is growing, yes. But a large component of its growth is through lending products, such as its buy now, pay later business Afterpay. These products do admittedly seem to be in demand, so I understand why the company is offering them. But it increases its exposure to credit risk in an arguably slowing economy, which I don't like.

In conclusion, for investors looking for growth at a reasonable price, you could do a lot worse than Block stock. Returns during the past seven years have been minimal and it's hard to see that continuing if the company keeps growing and its profit margins improve, as they're already doing. That said, the company's ever-broadening focus doesn't excite me, and this makes it hard to know what to expect for the long term with this business.

For this reason, Block isn't a stock that I'm adding today, but I could certainly understand why other investors might.