Has Klarna’s Stock Slide Created Opportunity After New International Partnerships?

• Wondering if Klarna Group is a bargain or overpriced? There is a lot more to its story than just headline numbers, and you are about to get the inside scoop.
• The stock has dipped by 5.3% in the past week and 9.2% over the last month, bringing its year-to-date decline to a significant 25.2%. This may signal shifting market sentiment or a reassessment of growth prospects.
• Recent headlines have highlighted Klarna Group’s new international partnerships and expansion plans, catching the attention of many investors. At the same time, concerns surrounding the competitive landscape and regulatory changes have been driving recent price moves.
• According to our checks, Klarna Group earns a value score of 0/6, suggesting it appears overvalued using traditional methods. However, valuation is rarely so simple. In the following article, we will break down the standard valuation approaches and reveal an alternative way to assess a company's worth.

Klarna Group scores just 0/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Klarna Group Excess Returns Analysis

The Excess Returns model evaluates Klarna Group’s ability to generate profits above its cost of capital by focusing on whether its investments deliver sufficient returns compared to what shareholders require. This method is particularly meaningful for financial companies because it emphasizes sustainable value creation rather than mere earnings growth.

Based on recent projections, Klarna Group holds a book value of $6.32 per share and is expected to generate a stable earnings per share of $0.35, as estimated by the weighted return on equity from 9 analysts. The company’s cost of equity stands at $0.48 per share, but the excess return is negative at $-0.14 per share. Over the longer term, Klarna’s average return on equity is 5.63 percent, and its stable book value is $6.15 per share, calculated using the median from the past five years.

This approach estimates Klarna Group’s intrinsic value at a significant discount to the current share price. This result implies the stock is 984.5 percent overvalued. In other words, the market is pricing the company far above what its capital returns and growth profile justify under this model.

Result: OVERVALUED

Our Excess Returns analysis suggests Klarna Group may be overvalued by 984.5%. Discover 879 undervalued stocks or create your own screener to find better value opportunities.

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

Approach 2: Klarna Group Price vs Sales

Valuing Klarna Group using its Price-to-Sales (P/S) multiple is especially relevant, as this approach is well-suited for companies where revenue growth is a key focus and earnings may be volatile or less informative. For fintech and other high-growth financial businesses, the P/S ratio offers insights into how much investors are willing to pay for each dollar of sales. It is a popular metric in sectors where profitability is still evolving.

In practice, expectations for growth and the level of risk associated with a company determine what counts as a “fair” P/S ratio. Higher-growth companies typically trade at bigger multiples, while those facing uncertainty or slowdowns command lower ratios. Comparing Klarna Group’s P/S ratio of 4.30x to the industry average of 2.43x and a peer average of 4.12x highlights that the company is trading at a premium to its sector but roughly in line with other direct competitors.

Simply Wall St’s proprietary “Fair Ratio” takes this a step further by also accounting for Klarna’s unique combination of sales growth, margins, risk profile, industry context, and market capitalization to compute a tailored benchmark. This holistic approach improves on simple peer or sector comparisons, as it factors in what truly drives returns for shareholders in Klarna’s specific situation.

In Klarna’s case, the actual P/S multiple is not significantly different from the Fair Ratio calculated for the business. This suggests the market is pricing the stock with a good appreciation of its prospects and risks, rather than being overly optimistic or pessimistic.

Result: ABOUT RIGHT

PS ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1406 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Klarna Group Narrative

Earlier we mentioned that there's an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is simply your story about a company, built on your perspective of its future, such as your forecast for revenue, profits, and what you believe the business is truly worth. Narratives help you connect the company's story to a specific financial forecast, and from there, to a clear fair value estimate.

Narratives are easy to use and are available to everyone on Simply Wall St’s Community page, a platform trusted by millions of investors. They help you cut through the noise by making it simple to compare your Fair Value to the current share price, guiding when you might want to buy, hold, or sell. Even better, Narratives are updated dynamically whenever important news or earnings reports are released, so your view stays current.

For Klarna Group, you’ll find different investors may see very different stories. One might predict outstanding growth and a much higher fair value, while another expects stiffer competition and sees it trading above its true worth. Narratives put all these perspectives in your hands, empowering smarter, more personalized decisions as markets evolve.

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