PagSeguro Rises 8.3% as Expansion News Drives Fresh Focus on Share Price Value

• Wondering whether PagSeguro Digital is truly a bargain or just another stock on your watchlist? Here is a breakdown of recent developments to help separate hype from value.
• The share price has jumped 8.3% in the past week and is up 63.5% year to date. This is likely to attract investors who are seeking growth or noticing a shift in risk sentiment.
• Recent headlines have highlighted PagSeguro’s ongoing expansion in digital payment services and new partnerships in Brazil, fueling renewed optimism about its market position. There has also been discussion about rising competition in the fintech space, which may influence opportunities and risks ahead.
• On a six-point valuation scorecard, PagSeguro Digital receives an impressive 5 out of 6 for being undervalued, putting it ahead of most digital finance peers. The next section will examine the valuation approaches behind that score and explain why the final method could offer the clearest view of the stock’s estimated worth.

PagSeguro Digital delivered 49.0% returns over the last year. See how this stacks up to the rest of the Diversified Financial industry.

Approach 1: PagSeguro Digital Excess Returns Analysis

The Excess Returns valuation method focuses on how efficiently a company generates profit compared to its cost of equity. It measures whether PagSeguro Digital is able to earn above the minimum rate required by investors on its book value of equity. This approach highlights long-term return on invested capital and sustainable growth and provides a clear sense of value beyond just current earnings or dividends.

For PagSeguro Digital, the relevant figures are as follows:

• Book Value: $51.16 per share
• Stable Earnings Per Share (EPS): $9.02 per share
  (Source: Weighted future Return on Equity estimates from 9 analysts.)
• Cost of Equity: $6.02 per share
• Excess Return: $3.00 per share
• Average Return on Equity: 16.02%
• Stable Book Value: $56.31 per share
  (Source: Weighted future Book Value estimates from 6 analysts.)

With the Excess Returns model, these numbers point toward an estimated intrinsic value for PagSeguro Digital that is 42.2% higher than the current share price. Based on this analysis, the stock appears significantly undervalued and may offer meaningful upside if the company continues to deliver above-average returns on equity.

Result: UNDERVALUED

Our Excess Returns analysis suggests PagSeguro Digital is undervalued by 42.2%. Track this in your watchlist or portfolio, or discover 914 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 PagSeguro Digital.

Approach 2: PagSeguro Digital Price vs Earnings

For profitable companies like PagSeguro Digital, the Price-to-Earnings (PE) ratio is a widely used valuation metric. It helps investors determine how much they are paying for each dollar of company earnings, offering an intuitive gauge for comparing similar businesses. A lower PE can signal an undervalued stock, but this assessment must account for factors such as growth prospects and risk profile, as faster growth and lower risk will justify higher "normal" or "fair" PE ratios.

Currently, PagSeguro Digital trades at a PE ratio of 7.34x, which stands in stark contrast to the Diversified Financial industry average PE of 14.02x and the peer group average of 42.42x. While this headline multiple may catch value-seekers’ attention, it is essential to factor in company-specific fundamentals and growth rates, not just broad benchmarks.

This is where the Simply Wall St Fair Ratio comes into play. Using a proprietary methodology, the Fair Ratio for PagSeguro Digital is set at 15.08x, calculated to reflect expected earnings growth, profit margins, industry trends, market capitalization, and key risk factors. This approach offers a clearer and more tailored perspective on valuation than generic peer or industry comparisons, as it aligns expectations with the unique qualities of PagSeguro Digital.

With the actual PE ratio of 7.34x significantly below the Fair Ratio of 15.08x, the stock appears notably undervalued on this metric. This may suggest further possible upside for long-term investors seeking value.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1438 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your PagSeguro Digital Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives, an intuitive, dynamic tool that makes investment decisions both smarter and more personal. A Narrative is your story about a company, tying real-world business developments and your own expectations (such as future revenue, earnings, and margins) to a unique financial forecast and fair value. Rather than relying purely on analyst consensus or raw data, Narratives make it simple for you to connect PagSeguro Digital’s latest news, such as shifting interest rates, new client wins, or intensifying competition, to your valuation and investment thesis.

Available on the Simply Wall St Community page and used by millions of investors, Narratives quickly show you if the current share price is above or below your personalized Fair Value. As new information emerges, whether from company earnings, sector news, or policy changes, your Narrative is automatically updated, ensuring you are always working with the most relevant data.

For example, one investor might build a bullish Narrative for PagSeguro Digital, projecting a price target as high as $13.98 based on robust earnings growth and successful buybacks. In contrast, a more cautious peer might see fair value closer to $5.17 if risks around competition or profit margins dominate their outlook. This approach empowers you to align your buy or sell decisions with your own, evolving view of the company's potential.

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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