Is PayPal (PYPL) Offering Value After Multi‑Year Share Price Slide And Low P/E Ratio

• Investors may be wondering whether PayPal Holdings is starting to look like a bargain at its current share price, or if the market is pricing it fairly based on what you get today.
• The stock last closed at US$46.75, with a 1.2% decline over 7 days, a 10.7% decline over 30 days, a 19.6% decline year to date, a 32.4% decline over 1 year and a 38.0% decline over 3 years, while the 5-year return stands at an 80.6% decline.
• Recent headlines around PayPal have focused on its position in digital payments and the competitive pressure from other large tech and fintech players. This keeps attention on whether its current market share and business model are being rewarded appropriately by the market. This backdrop provides important context when you weigh up whether the current share price lines up with its fundamentals.
• On our checklist of six valuation tests, PayPal scores 5 out of 6 on our value score, which you can see in more detail at 5 out of 6. Next, we look at how different valuation methods assess the stock and then finish with a more complete way to think about valuation overall.

Find out why PayPal Holdings's -32.4% return over the last year is lagging behind its peers.

Approach 1: PayPal Holdings Excess Returns Analysis

The Excess Returns model evaluates how much value a company can generate above the return that shareholders require, based on its equity and earnings power rather than focusing on cash flows alone.

For PayPal Holdings, the model uses a Book Value of $22.02 per share and a Stable EPS of $6.21 per share, based on weighted future Return on Equity estimates from 8 analysts. The Average Return on Equity used in the model is 22.75%, compared with a Cost of Equity of $2.10 per share. That gap feeds into an estimated Excess Return of $4.11 per share, which is capitalised over time using a Stable Book Value of $27.30 per share, also sourced from 8 analysts’ book value estimates.

When these inputs are combined, the Excess Returns model produces an intrinsic value of $122.86 per share. Compared with the recent share price of $46.75, this corresponds to a 61.9% discount, indicating that the shares are currently priced well below this estimate of fair value.

Result: UNDERVALUED

Our Excess Returns analysis suggests PayPal Holdings is undervalued by 61.9%. Track this in your watchlist or portfolio, or discover 47 more high quality undervalued stocks.

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

Approach 2: PayPal Holdings Price vs Earnings

For a profitable company like PayPal Holdings, the P/E ratio is a useful way to see how much investors are currently paying for each dollar of earnings. It links the share price to the earnings that support it, which is often a primary focus for established businesses.

What counts as a “normal” P/E depends on how the market views a company’s growth prospects and risk. Higher expected growth or lower perceived risk can justify a higher multiple, while slower expected growth or higher risk typically points to a lower one. PayPal’s current P/E is 8.22x, which is below both the Diversified Financial industry average of 18.50x and the peer group average of 31.98x.

Simply Wall St’s Fair Ratio for PayPal is 15.97x. This is a proprietary estimate of what a reasonable P/E could be for the company, based on factors such as earnings growth, profit margins, industry, market cap and risk profile. Because it is tailored to PayPal’s own characteristics rather than broad group averages, it can be a more targeted benchmark. Comparing the Fair Ratio of 15.97x with the actual P/E of 8.22x points to the shares trading below this customised valuation yardstick.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your PayPal Holdings Narrative

Earlier we mentioned that there is an even better way to understand valuation. Narratives let you attach your own story about PayPal Holdings to the numbers by linking your assumptions for fair value, future revenue, earnings and margins to a clear forecast, then comparing that fair value to today’s price to decide if the stock looks cheap or expensive on your terms.

On Simply Wall St’s Community page, millions of investors use Narratives as an accessible tool. They set their view of PayPal’s future, and the platform turns that into a living model that updates when new earnings, news or analyst estimates arrive. This means your fair value view keeps moving with fresh information rather than staying frozen.

For example, one PayPal Narrative on the Community values the shares at about US$51, another at around US$189, and others cluster between roughly US$75 and US$116. This shows how different investors can look at the same business, plug in different growth, margin and P/E expectations, and end up with very different but clearly quantified stories that you can compare directly to the current US$46.75 share price.

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