StoneCo (STNE) Rebounds Sharply, Is It Still 24% Below Fair Value?
StoneCo (STNE) has been drawing fresh attention after recent share price moves, with the stock up 23.2% over the past week and 13.8% over the past month on the Nasdaq.
That sharp 23.2% 7 day share price return for StoneCo sits against a tougher backdrop, with the year to date share price return down 21.7% and the latest close at US$11.51. Recent strength suggests investors are reassessing either the growth opportunity or the level of risk, even though the 1 year total shareholder return is still down 23.3% while the 3 year total shareholder return is up 39.3%.
Scan other fast moving fintech and payments stocks showing similar momentum and business profiles to StoneCo with our hand picked 20 high quality undiscovered gems.
Bulls see StoneCo’s rebound as proof the business is mispriced, while bears point to patchy earnings trends and past share price damage. Which side does today’s valuation actually lean toward?
Most Popular Narrative: 24% Undervalued
StoneCo's most followed valuation story pegs fair value at $15.21, compared with the latest close at $11.51, which points to a sizeable gap that investors are now weighing against a tougher earnings outlook.
Focused divestment of capital-intensive software assets has freed up substantial capital (about 25% of market capitalization). This enables StoneCo to redeploy resources to higher-growth, higher-margin financial services and to return excess capital via share buybacks, positively impacting EPS and net margins.
See why 69 investors see StoneCo as 24% undervalued.
Result: Fair Value of $15.21 (UNDERVALUED)
Still, the story can break if slower total payment volume growth persists or if higher risk loans force materially heavier credit loss provisions.
Find out about the key risks to this StoneCo narrative.
Next Steps
Mixed signals around StoneCo can create noise, so move quickly, review the full picture for yourself and weigh up the 3 key rewards and 2 important warning signs.
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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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