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- Paypal $PYPL at depressed valuations. Trap or Rare Opportunity?
Paypal $PYPL at depressed valuations. Trap or Rare Opportunity?
Thoughtful Investing
May 12, 2023
P/E (NTM) is at an all time low and stock price is back at year 2017 levels:
Forward P/E multiples for 2024, 2025, 2026 and 2027 also looks very cheap:
High free cash flow yield relative to market cap (LTM):
High free cash flow yield relative to enterprise value (LTM):
Aside from earnings and free cash flow, Paypal’s revenue is also estimated to keep on growing in the next years:
Has a strong balance sheet and Paypal is returning capital to shareholders via share repurchases:
Paypal will continue to return capital to shareholders. FY'23 share repurchases is expected to reach ~$4 billion:
caveat
Caveat regarding Paypal’s free cash flow. The company’s stock based compensation is high. In 2022, FCF was $5.1B while SBC was $1.26B.
FCF yield is still attractive even considering SBC though.
I think the current valuation of $PYPL offers a rare opportunity for long-term investors especially if the company has a good probability to achieve the growth estimates for the next years.
The risk of course is if they massively miss the growth estimates and if fundamentals of Paypal deteriorates because of intense competition ( $AAPL $SQ etc…)
In the second installment of this post, I will conduct an in-depth analysis of $PYPL, encompassing its business model, competitive advantages, and other relevant factors. Additionally, I will provide a more detailed examination of its valuation, specifying the share prices that I consider to be indicative of a Reasonable Buy, Good Buy, and Strong Buy.
The tool that I’m using for screening and researching stocks is Koyfin. I highly recommend it for stock market investors.
Use the link below to get a 10% discount:
