With only a few hours of trade left in September, the Zip Co Ltd (ASX: ZIP) share price looks set to post another month of strong outperformance.
That's despite a sizeable fall today.
In early afternoon trade on Monday, shares in the S&P/ASX 200 Index (ASX: XJO) buy now, pay later (BNPL) stock are changing hands for $2.74 apiece, down 1.8% from Friday's close.
But don't feel too bad for shareholders.
On 30 August, Zip stock ended the day at $2.40 a share.
That puts the Zip share price up 14.2% in September, racing ahead of the 2.2% gain posted by the ASX 200 over this same period.
As the chart above shows, September's strong run has been the norm for Zip over the past year rather than the exception.
In fact, the ASX 200 BNPL stock is now up a jaw-dropping 880.4% over 12 months.
What's been driving the Zip share price through the roof?
Investors have been bidding up the Zip share price over the past year after the company moved from targeting growth at any cost to a new, more sustainable and profitable business model.
That strategy shift looks to have paid off handsomely, with Zip now having reported four consecutive profitable quarters after struggling with rising losses for several prior years.
Zip reported its full-year financial results (FY 2024) on 27 August.
Among the core financial metrics, the company boosted revenue by 28.3% from FY 2023 to $868 million.
The increase in revenue was driven by a 14.0% year on year increase in total transaction volume (TTV), which came in at $10.1 billion. On the bottom line, Zip's cash gross profit soared 52.8% from the prior year to $373 million.
And the longer-term outlook for the balance sheet took a positive turn in July when Zip completed a $267 million capital raise to erase its corporate debts.
Can the ASX 200 BNPL stock keep outperforming?
Of course, much of that is now in the rear-view mirror.
The million-dollar question now is whether the Zip share price will continue to outpace the ASX 200 in the months ahead.
Following Zip's full-year results, CEO Cynthia Scott said the company was on track to continue growing profitably.
According to Scott:
We maintain a clear strategy with identified growth opportunities in both markets to drive continued profitable growth in FY 2025 and beyond and deliver long-term value for our customers, merchants and stakeholders.
Now, I wouldn't expect Zip shares to soar another 880% over the next 12 months.
But there are good reasons to believe the stock could continue to reward shareholders.
"Zip's recent journey has been one of improving quality, with reduced industry competition, strong US growth and retail partner validation," Blackwattle's Robert Hawkesford and Daniel Broeren said recently.
Part of their bullish assessment for the outlook of the Zip share price stems from the untapped growth potential in the United States.
According to Broeren and Hawkesford:
Despite Zip's strong recent performance, we still see significant opportunity for growth in the US where Buy-Now Pay-Later (BNPL) penetration is only 2%, versus ~15% in Australia and ~20% in Europe.
And with interest rates finally coming down in the US, rate-sensitive BNPL stocks like Zip could enjoy some fresh tailwinds in the year ahead.
