- If you are wondering whether PagSeguro Digital's current share price truly reflects its underlying worth, this article walks through the key signals you can use to judge that.
- The stock recently closed at US$10.76, with returns of 2.2% over the last 7 days, 7.8% over 30 days, 11.3% year to date, 35.4% over 1 year, 31.3% over 3 years and a 75.3% decline over 5 years.
- Recent coverage has focused on PagSeguro Digital's position within diversified financials and how changing views on digital payments and financial technology risk are feeding into sentiment. This backdrop helps explain why some investors are revisiting the stock after sharp moves over both shorter and longer timeframes.
- On Simply Wall St's valuation checks, PagSeguro Digital currently holds a 5 out of 6 valuation score. The sections that follow break down the different valuation approaches behind that number, before finishing with a framework that can help you interpret valuation in a more complete way.
Approach 1: PagSeguro Digital Excess Returns Analysis
The Excess Returns model looks at how efficiently PagSeguro Digital turns shareholder capital into profits, then compares those returns with the cost of funding that capital. In simple terms, it asks whether each dollar of equity is pulling in more earnings than it costs to maintain.
For PagSeguro Digital, the model uses a Book Value of $52.34 per share and a Stable EPS of $9.63 per share, based on weighted future Return on Equity estimates from 11 analysts. The Average Return on Equity is 16.45%, while the Cost of Equity is $5.87 per share. The difference between what the equity earns and what it costs, the Excess Return, is $3.77 per share. A Stable Book Value of $58.58 per share, sourced from 6 analysts, feeds into this long term profile.
Running these inputs through the Excess Returns framework produces an estimated intrinsic value of $22.65 per share. Compared with the recent share price of $10.76, this model suggests the stock is 52.5% undervalued.
Result: UNDERVALUED
Our Excess Returns analysis suggests PagSeguro Digital is undervalued by 52.5%. Track this in your watchlist or portfolio, or discover 63 more high quality undervalued stocks.
Approach 2: PagSeguro Digital Price vs Earnings
For profitable companies like PagSeguro Digital, the P/E ratio is a useful way to relate what you pay per share to the earnings that each share generates. It tells you how many dollars investors are willing to pay today for one dollar of current earnings.
What counts as a “normal” P/E depends on factors such as how quickly earnings are expected to grow and how risky those earnings appear to be. Higher growth or lower perceived risk can support a higher P/E, while slower growth or higher risk usually points to a lower multiple.
PagSeguro Digital currently trades on a P/E of 7.25x. That compares with an average P/E of 10.48x for its peer group and 15.99x for the Diversified Financial industry. Simply Wall St’s proprietary “Fair Ratio” for PagSeguro Digital is 12.70x. This Fair Ratio reflects factors such as earnings growth characteristics, profit margins, industry classification, market capitalization and company specific risks. It therefore aims to tailor the multiple to PagSeguro Digital rather than relying only on broad peer or industry comparisons.
Because the Fair Ratio of 12.70x is higher than the current P/E of 7.25x, this approach points to the shares being undervalued on an earnings basis.
Result: UNDERVALUED
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Upgrade Your Decision Making: Choose your PagSeguro Digital Narrative
Earlier it was mentioned that there is an even better way to understand valuation, so this is where Narratives come in as a simple way for you to attach a clear story to the numbers. You can link your view of PagSeguro Digital's future revenue, earnings and margins to a financial forecast and then to a Fair Value that you can compare with the current share price to help decide whether to buy, hold or sell. All of this is within the Narratives tool on Simply Wall St's Community page that is used by millions of investors. Narratives also update automatically when new information such as news or earnings arrives. Different investors can express very different views on the same stock. For example, one Narrative might lean toward the more optimistic Fair Value of about US$14.33, while another leans toward the more cautious end near US$6.67, giving you a clear, side by side range of possible outcomes to weigh against your own expectations.
For PagSeguro Digital however we will make it really easy for you with previews of two leading PagSeguro Digital Narratives:
Fair value: US$12.72
Implied discount to this narrative: 15.4% below fair value
Revenue growth assumption: 4.8% per year
- Analysts in this camp focus on credit portfolio growth, repricing and PagBank engagement as key drivers for higher revenue and earnings.
- They factor in rising profit margins, lower funding costs and ongoing share buybacks, which together support higher earnings per share in their models.
- The fair value of US$12.72 reflects these assumptions about future revenue, profitability and capital returns, while still acknowledging interest rate, competition and buyback related risks.
Fair value: US$9.34
Implied premium to this narrative: 15.2% above fair value
Revenue growth assumption: 4.4% per year
- The more cautious view leans on competitive pressure from big tech and other fintechs, regulatory demands and economic volatility as headwinds for growth and margins.
- These analysts assume slower revenue growth, thinner profit margins and a lower future P/E multiple, even though they still factor in share buybacks and dividend payments.
- The fair value of US$9.34 is based on these more conservative expectations for revenue, earnings and valuation, and highlights the risk that the stock could trade closer to bearish targets if those concerns play out.
If you want to see how these bullish and bearish cases are built line by line, you can read the full narratives, compare the numbers that sit behind them and decide which story best matches your own expectations for PagSeguro Digital. To see how these results tie into long-term growth, risks, and valuation, check out the full range of community narratives for PagSeguro Digital on Simply Wall St. Add the company to your watchlist or portfolio so you'll be alerted when the story evolves.
Do you think there's more to the story for PagSeguro Digital? Head over to our Community to see what others are saying!
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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