Buy the Dip in This Undervalued Growth Stock
PagSeguro Digital Ltd. (PAGS) is a Brazil-based fintech company. It provides payment solutions to micro-merchants along with small- and medium-sized companies primarily in Brazil, as well as internationally. They deliver end-to-end digital setup for receiving and spending funds, managing client accounts, credit and debit cards, bank transfers, and more related financial services. It also provides point of sale (POS) devices and offers digital gaming payment platforms. Started in 2006, it has its headquarters in Sao Paulo, Brazil.
Valued at $4.17 billion by market cap, PagSeguro stock has outperformed the broader market by rallying 38% over the past year, including a surge of nearly 75% over the past six months.
However, the stock is now up just 1.7% YTD, having pulled back more than 15% from its late February 52-week high.
At 9.16 times forward earnings and 1.22 times sales, PAGS currently trades at a discount to other Brazil-based fintechs, like StoneCo (STNE) and Nu Holdings (NU).
In its upcoming earnings report, slated for May 23, analysts are expecting PAGS to report EPS growth of 30.4% to $0.30. For the full year, Wall Street is targeting EPS growth of 18.4% to $1.29, while revenue is expected to increase 4.6% to $3.35 billion.
Looking back, PAGS has surpassed analysts' consensus profit estimates in each of the past four quarters.
Wall Street has a bullish view on PAGS, which has an average “Moderate Buy” rating from the 13 analysts in coverage. Nine of them call PAGS a “Strong Buy,” with the remaining 4 calling it a “Hold.”
The mean price target for PagSeguro stock is $16.06, which is a premium of more than 26% to last Friday's close.
Among the analysts that upgraded PAGS in March were New Street Research and Evercore, with both firms raising the stock from “Hold” equivalents to “Buy.” In a note to clients, Evercore analyst Sheriq Sumar said the stock still looked cheap after its advance from October lows, and suggested that the current valuation wasn't fully pricing in the interest rate outlook in Brazil.
For investors seeking out cheap growth stocks to buy at a discount, PAGS looks like a fintech bargain worth considering at current levels.
On the date of publication, Ruchi Gupta did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.