StoneCo (STNE) Could Be 24% Undervalued Following Its Entrepreneur Banking Push

StoneCo (STNE) has drawn fresh attention after its recent share performance, with the stock rising about 18% over the past month despite a year-to-date decline of roughly 23%.

That rebound sits against a tougher backdrop, with the year to date share price return down 23.21% and the 1 year total shareholder return down 23.55%. The 3 year total shareholder return of 37.23% hints that long term holders have seen periods of recovery, even as recent momentum has faded again after the 7 day share price pullback of 9.47% from a last close of US$11.28.

Compare StoneCo's choppy performance with a hand picked set of resilient businesses in our 32 resilient stocks with low risk scores to see how more stable profiles have behaved through similar swings.

StoneCo now trades near US$11, while analyst targets cluster closer to US$15 and one intrinsic estimate implies an even deeper discount. So where does fair value really sit after this latest swing?

Most Popular Narrative: 24% Undervalued

On the most followed view, StoneCo screens materially cheaper than its implied fair value of $14.81, with the stock last trading at $11.28. That gap is being framed less as a simple multiple mismatch and more as a question of whether the market buys into StoneCo's shift toward an entrepreneur banking model funded by cheaper deposits.

The ongoing repositioning of StoneCo toward a full-service bank for entrepreneurs, with a unified merchant account that includes payments, banking and credit, is widening the chance to raise average revenue per active client and support more durable earnings streams.

Expansion of the credit portfolio to BRL 3.8b, including greater use of secured and government-backed working-capital lines with partial guarantees, gives StoneCo more room to grow higher-yielding assets that can lift revenue and net income if risk-adjusted returns are maintained.

See why 70 investors see StoneCo as 24% undervalued.

Result: Fair Value of $14.81 (UNDERVALUED)

Still, the StoneCo story can crack if the cost of risk in the credit book stays elevated, or if weak Total Payment Volume continues to squeeze transaction economics.

Find out about the key risks to this StoneCo narrative.

Next Steps

Mixed messages in the StoneCo story so far. If the combination of potential upside and live issues has your attention, take a closer look at the balance of 3 key rewards and 2 important warning signs.

Looking for more investment ideas beyond StoneCo?

Do not stop with StoneCo. Use the broader market to cross check your thinking, compare different setups, and pressure test where your capital works hardest.

• Target potential mispricing by scanning companies that screen well on quality and valuation through our 33 high quality undervalued stocks.
• Lock in income-focused ideas by sorting through a curated set of reliable payers using the 8 dividend fortresses.
• Prioritise resilience first by filtering for businesses with strong balance sheets and fundamentals via the list of solid balance sheet and fundamentals (25 results).

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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