Should You Rethink DLocal After New Partnerships and a 15% Drop?

• Ever wondered if DLocal is currently a bargain or overpriced? If you’re rethinking your fintech exposure, there are some numbers here you will want to see.
• After dropping 15.3% over the past month, DLocal is still up 19.5% in the last year and 11.7% year-to-date. This creates an intriguing story beneath the volatility.
• Recently, the company has been in the headlines for announcing several new strategic partnerships aimed at expanding their payments infrastructure across emerging markets. This has prompted renewed interest from investors who are watching how these moves might influence both growth potential and perceived risks.
• DLocal currently scores a 3/6 on our valuation check, which raises the question: do traditional valuation metrics tell the whole story? We will review a few common approaches, but stay tuned for a more insightful way to assess true value at the end.

DLocal delivered 19.5% returns over the last year. See how this stacks up to the rest of the Diversified Financial industry.

Approach 1: DLocal Excess Returns Analysis

The Excess Returns model evaluates a company's ability to generate returns on its invested capital above the cost of equity. In DLocal's case, the focus is on how efficiently the company can deploy shareholders’ capital for growth and profitability over time, using both present and projected estimates for Book Value and return on equity.

The core figures for DLocal reveal a strong performance profile. Book Value currently stands at $1.71 per share, with a stable EPS of $0.97 per share. These figures are based on weighted forward estimates from five analysts. The cost of equity, representing the required shareholder return, is $0.24 per share. DLocal’s excess return per share is a healthy $0.74. The company’s average return on equity is a robust 37.50%, signaling efficiency well beyond the industry average. Looking ahead, the stable Book Value is projected to grow to $2.59 per share according to consensus forecasts from four analysts.

This model estimates DLocal's intrinsic value at $15.26 per share. This implies the stock is trading at a 14.5% discount to its fair value. Given current market levels, this suggests DLocal may be undervalued for investors focused on capital efficiency and long-term growth potential.

Result: UNDERVALUED

Our Excess Returns analysis suggests DLocal is undervalued by 14.5%. Track this in your watchlist or portfolio, or discover 926 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for DLocal.

Approach 2: DLocal Price vs Earnings

For consistently profitable companies like DLocal, the Price-to-Earnings (PE) ratio is a widely used valuation metric. It gauges how much investors are willing to pay for each dollar of earnings, making it a quick way to compare relative value, especially among industry peers. The PE ratio is shaped by expectations for future growth as well as perceived business risks. Fast-growing, lower-risk businesses often command higher PE multiples, while slower-growth or riskier firms tend to see lower ones.

DLocal is currently trading at a PE ratio of 22.5x. That is notably higher than the Diversified Financial industry average of 13.6x, but well below the average for peers, which sits at an elevated 61.0x. These benchmarks illustrate the market's optimism for DLocal’s outlook, while still being more conservative compared to its direct peer group.

Simply Wall St’s proprietary “Fair Ratio” for DLocal is 21.8x. Unlike raw industry or peer comparisons, this Fair Ratio factors in the company’s specific earnings growth forecast, profit margins, industry characteristics, overall market capitalization, and key risk elements. This tailored approach delivers a more relevant and accurate benchmark for valuation, giving investors a clearer sense of whether the stock’s price accurately reflects its unique profile.

Comparing DLocal’s current PE of 22.5x to its Fair Ratio of 21.8x, the difference is just 0.7x. This signals the shares are trading very close to their objectively fair level. That suggests neither a meaningful bargain nor an extreme premium at the current price.

Result: ABOUT RIGHT

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1440 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your DLocal Narrative

Earlier, we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives, an innovative, story-driven method for making more informed investment decisions. A Narrative is simply your perspective on a company's future, weaving together its story, your financial estimates for things like future revenue and margins, and your own assessment of fair value. This approach links the company’s underlying business developments and risks directly to projections and value, making it a far more intuitive and practical decision-making tool.

Narratives are easy to use and accessible right now on Simply Wall St’s Community page, where millions of investors test and share their views. By building your own or reviewing others' Narratives, you connect news or events with what that means for future financial outcomes and, importantly, what a fair share price should be. Narratives update dynamically as new information such as news, product launches, or earnings comes in, so you’re never relying on stale analysis.

For example, on DLocal, one investor’s Narrative might project aggressive expansion, estimate a fair value as high as $195 per share, and thus see the current price as a significant opportunity. Another investor’s more cautious outlook might see limited upside and peg fair value closer to $10, demonstrating how Narratives powerfully personalize the investment decision based on your view of the company’s story.

Do you think there's more to the story for DLocal? 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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