Core Insights - The article compares two financial transaction services companies, PagSeguro Digital Ltd. (PAGS) and DLocal (DLO), to determine which is the better undervalued stock option for investors [1] Valuation Metrics - PAGS has a forward P/E ratio of 7.65, significantly lower than DLO's forward P/E of 17.66, indicating that PAGS may be undervalued [5] - The PEG ratio for PAGS is 0.68, while DLO's PEG ratio is 1.05, suggesting that PAGS has a better growth outlook relative to its price [5] - PAGS has a P/B ratio of 1.25 compared to DLO's P/B of 5.75, further indicating that PAGS is more attractively valued based on its book value [6] Investment Ratings - PAGS currently holds a Zacks Rank of 2 (Buy), while DLO has a Zacks Rank of 3 (Hold), suggesting a stronger earnings outlook for PAGS [3] - Based on the valuation metrics and earnings outlook, PAGS is rated with a Value grade of A, whereas DLO has a Value grade of C, reinforcing PAGS as the superior value option [6]

Core Viewpoint - The article emphasizes the importance of value investing and highlights specific stocks, Global Blue Group and PagSeguro Digital, as strong value picks based on their financial metrics and Zacks Rank [2][8]. Group 1: Global Blue Group (GB) - Global Blue Group has a Zacks Rank of 2 (Buy) and an A for Value, indicating strong potential as a value stock [4]. - The stock is currently trading with a P/E ratio of 17.33, significantly lower than its industry's average P/E of 22.16 [4]. - GB's P/CF ratio stands at 10.66, which is attractive compared to the industry's average P/CF of 17.51, suggesting it may be undervalued [5]. Group 2: PagSeguro Digital (PAGS) - PagSeguro Digital also holds a Zacks Rank of 2 (Buy) and a Value grade of A, making it another appealing value investment [6]. - The company has a Forward P/E ratio of 6.86 and a PEG ratio of 0.61, both of which are favorable compared to the industry's average P/E of 22.16 and PEG ratio of 1.63 [6]. - PAGS's price-to-earnings ratio has fluctuated between 4.84 and 9.72 over the past year, with a median of 6.55, indicating potential undervaluation [7].

Core Viewpoint - PagSeguro Digital announced a special cash dividend of $0.12 per share, leading to a significant increase in its stock price, closing nearly 13% higher, outperforming the S&P 500 index [1][2]. Dividend Announcement - The special dividend of $0.12 per share will be paid on August 15 to investors of record as of July 16 [2]. - PagSeguro plans to make two additional special dividend payouts of the same amount within the next three quarters [4]. Dividend Policy - The company aims to establish an annual dividend policy corresponding to approximately 10% of its distributable net income [5]. - PagSeguro declared its first regular dividend of $0.14 per share in mid-May, which was paid out earlier this month [4]. Market Position - The Brazilian fintech sector has significant growth potential, supported by PagSeguro's innovative offerings in an under-banked market [6]. - The new dividend policy enhances the attractiveness of PagSeguro's stock, which is already supported by solid financial performance and consistent profitability [6].

Financial Highlights - PagSeguro Digital Ltd's net revenue for Q1 2025 reached R$49 billion, a 13% year-over-year increase[17] - The company's total payment volume (TPV) for Q1 2025 was R$129 billion, up 16% year-over-year[17] - Net income for Q1 2025 was R$554 million, representing a 6% year-over-year increase[17] - The expanded credit portfolio grew to R$46 billion, a 34% increase year-over-year[19] - Total funding increased to R$40 billion, a 24% year-over-year increase[19] Operational Highlights - PagSeguro Digital Ltd had 320 million total clients in Q1 2025, a 2% year-over-year increase[17] - The company repurchased R$11 billion worth of shares LTM and R$353 million YTD (Apr-25)[20] - Active banking clients increased by 5% year-over-year[54] Business Performance - Banking revenue increased by 60% year-over-year, contributing to over 22% of total gross profit[128, 92] - Total deposits reached R$339 billion, an 11% year-over-year increase[39, 76] - Payroll loans increased by 63% year-over-year, reaching R$27 billion[39, 82] Future Outlook - The company is on track to deliver its 2025 guidance[128] - PagSeguro Digital Ltd expects to pay a cash dividend corresponding to approximately 10% of its net income on an annual basis[118]

Core Insights - PagSeguro Digital Ltd. reported quarterly earnings of $0.31 per share, exceeding the Zacks Consensus Estimate of $0.29 per share, but down from $0.33 per share a year ago, indicating a 6.90% earnings surprise [1] - The company generated revenues of $827.14 million for the quarter, slightly missing the Zacks Consensus Estimate by 0.01%, and down from $869.86 million year-over-year [2] - PagSeguro Digital's stock has increased approximately 57.7% since the beginning of the year, significantly outperforming the S&P 500's gain of 0.1% [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.30, with projected revenues of $874.15 million, while the estimate for the current fiscal year is $1.24 on revenues of $3.6 billion [7] - The estimate revisions trend for PagSeguro Digital is mixed, resulting in a Zacks Rank 3 (Hold), suggesting the stock is expected to perform in line with the market in the near future [6] Industry Context - The Financial Transaction Services industry, to which PagSeguro Digital belongs, is currently ranked in the top 32% of over 250 Zacks industries, indicating a favorable outlook compared to the bottom 50% [8]

Core Insights - PagBank announced its first dividend payment of approximately R$250 million (USD 0.14 per common share) and plans to distribute dividends annually, corresponding to about 10% of its net income, subject to market conditions and board approval [1][9] Financial Performance - In 1Q25, PagBank reported net revenue of R$4.9 billion, a 13% year-over-year increase, and gross margin of R$1.9 billion, reflecting a 7% rise [2] - Recurring net income for the quarter was R$554 million, a 6% year-over-year increase, with earnings per share (EPS) reaching R$1.72, a 14% increase year-over-year [2][6] - The credit portfolio expanded to R$3.7 billion, marking a 34% increase compared to the same quarter last year and a 6% increase quarter-over-quarter [3] Customer Engagement and Market Position - PagBank has a customer base of over 32 million, with 17.7 million actively engaged in its ecosystem, emphasizing its strategy of providing a comprehensive financial services platform [4] - Total deposits reached R$33.9 billion, a 10.9% year-over-year rise, indicating effective fundraising in a high-interest-rate environment [7] Operational Efficiency - The company maintained a stable delinquency rate over 90 days at 2.3%, significantly lower than the market average of 4.4% [3] - The total payment volume processed reached R$129 billion, growing 16% year-over-year, with cash in reaching R$83 billion, up 26% year-over-year [7] Shareholder Value Initiatives - PagBank executed a second share buyback program totaling over R$353 million, reflecting management's confidence in its growth strategy [8] - The gross margin increased from 38% to 39% quarter-over-quarter, and return on equity (ROE) reached 15% on an annualized basis, a 140 basis points increase year-over-year [6]

Financial Data and Key Metrics Changes - The company reported a net revenue increase of 13% year over year, reaching BRL billion [6] - Non-GAAP net income was BRL 554 million, reflecting a 6% growth year over year [6] - Diluted EPS on a GAAP basis reached BRL 1.72, a 14% growth year over year [6][28] - Total deposits increased by 11%, reaching BRL 33.9 billion [16] - The total credit portfolio reached BRL 3.7 billion, a 34% year over year increase [18] Business Line Data and Key Metrics Changes - Payments TPV reached BRL 129 billion, growing 16% year over year [6][13] - The MSMB segment grew 11% year over year, while the large retail and online segment grew 30% year over year [14] - The banking revenue reached a record, growing 60% year over year, driven by higher interest income from the expanding credit portfolio [22] Market Data and Key Metrics Changes - The company has less than 1% market share in some banking businesses, indicating significant room for market penetration and future growth [10] - The cash in levels in PagBank accounts reached BRL 83 billion, with cashing per active client growing 23% year over year [15] Company Strategy and Development Direction - The company aims to become the primary financial partner for clients by integrating payments, banking, and credit services [9] - The focus is on winning MSMBs and scaling the platform, with a strategy to deepen engagement and boost monetization [9][10] - The company plans to balance growth and profitability while exploring initiatives to strengthen its capital structure [32] Management Comments on Operating Environment and Future Outlook - Management highlighted the resilience of the company in a challenging macroeconomic environment, maintaining positive results every quarter since the IPO [7][32] - The company is focused on mitigating macroeconomic uncertainty and executing its repricing strategy [32] - Management expressed confidence in achieving the guidance for the year, with expectations for continued growth in gross profit and earnings per share [31][87] Other Important Information - The company announced a cash dividend of $0.14 per common share, to be paid on June 6, marking the first dividend in its history [7][30] - The Basel Index improved by approximately five percentage points, reflecting an enhanced capital structure [30] Q&A Session Summary Question: What explains the deceleration in TPV growth from Q4 to Q1? - Management noted that the deceleration is partly due to tougher year-over-year comparisons and emphasized the company's diversified revenue sources beyond payments [36][38] Question: Why is the dividend distribution set at 10% of net income? - The company aims to balance dividends with share buybacks, indicating that the 10% is a guideline that may change based on future performance [43][44] Question: What drove the decrease in deposits this quarter? - Management explained that the decrease in checking accounts was influenced by higher opportunity costs in a rising rate environment, and emphasized efforts to manage funding costs effectively [48][51] Question: How durable is the repricing strategy? - Management indicated that repricing is necessary due to rising interest rates and that they are working to implement it without losing clients [58][86] Question: What is the outlook for the banking business's contribution to gross profit? - Management did not provide specific targets but indicated that the banking business is expected to continue growing and contributing significantly to overall profitability [114][116]

Financial Performance - Total revenue and income for Q1 2025 reached R$4,850,156, an increase of 12.6% compared to R$4,306,425 in Q1 2024[7] - Net income for the period was R$525,092, representing a 8.8% increase from R$482,547 in the same period last year[7] - Revenue from transaction activities and other services decreased to R$2,013,922, down 15.1% from R$2,369,350 in Q1 2024[7] - Financial income significantly increased to R$2,697,294, up 47.3% from R$1,831,996 in Q1 2024[7] - For the three-month period ended March 31, 2025, PagSeguro Digital reported a profit before income taxes of R$579,907,000, compared to R$572,369,000 in the same period of 2024, reflecting a slight increase of 1.0%[10] - Total losses for the period were R$83,451,000 in Q1 2025, down from R$102,737,000 in Q1 2024, indicating a reduction of 18.7%[10] - Basic earnings per common share for Q1 2025 were R$1.7297, compared to R$1.5225 in Q1 2024, an increase of 13.6%[7] - Total expenses for the three-month period ended March 31, 2025, were R$4,270,248, an increase from R$3,734,057 in the same period of 2024, representing a growth of approximately 14.4%[105] - Financial costs increased significantly to R$1,177,779 in Q1 2025 from R$827,133 in Q1 2024, marking a rise of about 42.3%[105] Assets and Liabilities - Total assets as of March 31, 2025, were R$69,137,847, a decrease from R$72,900,617 at the end of 2024[5] - Total liabilities decreased to R$54,194,999 from R$58,232,245 at the end of 2024, reflecting a reduction of 6.0%[6] - Total equity increased to R$14,942,848, up from R$14,668,372 at the end of 2024, marking a growth of 1.9%[6] - Cash and cash equivalents increased to R$954,123 from R$927,668 at the end of 2024, showing a growth of 2.9%[5] - Accounts receivable totaled R$56,291,950 as of March 31, 2025, a decrease from R$59,803,273 at the end of 2024[33] - The company’s total financial liabilities decreased to R$51,838,455 as of March 31, 2025, down from R$55,643,518 at the end of 2024, representing a reduction of about 6.4%[116] Cash Flow and Investments - The net cash provided by operating activities decreased to R$1,216,238,000 in Q1 2025 from R$2,428,612,000 in Q1 2024, representing a decline of 50.0%[10] - The company incurred net cash used in investing activities of R$801,598,000 in Q1 2025, compared to R$1,643,427,000 in Q1 2024, a decrease of 51.2%[10] - The company reported a borrowing revenue from Biva Sec with an interest rate of 100% of CDI plus 2.5% per year, indicating a strategic financial maneuver to optimize funding costs[48] Credit and Risk Management - The company’s expected credit losses for accounts receivable were R$283,753 as of March 31, 2025[37] - The expected credit losses for payroll loans increased to R$43,476, while credit card receivables and other loans were R$115,348 and R$124,929, respectively[40] - The total expected credit losses decreased from R$284,620 on December 31, 2024, to R$283,753 by March 31, 2025[40] - The Group's liquidity risk is managed by maintaining reserves and monitoring cash flows to ensure sufficient funds for obligations[129] - PagSeguro Group's credit risk is assessed through a Credit Committee that classifies card issuers into low, medium, and high-risk categories[126] Shareholder Actions - The company has authorized a share repurchase program of up to US$200 million for Class A common shares, following a previous program that repurchased US$250 million in shares[98] - The company repurchased 2,742,840 shares for a total amount of R$126,009,000, with an average price of US$7.80 per share[147] - A cash dividend of US$0.14 per common share was approved, to be paid on June 6, 2025[148] Related-Party Transactions - For the three-month period ended March 31, 2025, PagSeguro reported total revenue from related-party transactions of R$2,262,000, an increase from R$2,053,000 in the same period of 2024, representing a growth of approximately 10.1%[46] - The total expenses from related-party transactions for the three-month period ended March 31, 2025, amounted to R$117,171, a significant increase from R$94,076 in the same period of 2024, reflecting a rise of about 24.5%[46] Operational Developments - The company has incorporated new subsidiaries, Yamí and Zygo, in January and February 2025, expanding its operational footprint[14] - PagSeguro Digital's subsidiaries include PagSeguro Brazil, PagSeg Participações, and BS Holding, among others, contributing to its diversified financial services[15] Taxation - The effective income tax and social contribution rate for the three-month period ended March 31, 2025, was 9%, down from 16% in 2024, with total income tax and social contribution expense of R$54,816 compared to R$89,821 in 2024[84] - Deferred tax assets recognized for tax loss carry-forwards amounted to R$85,104, while deferred tax liabilities totaled R$1,673,660 as of March 31, 2025[83]

Company Performance - PagSeguro Digital Ltd. closed at $9.75, reflecting a -1.02% change from the previous day, underperforming the S&P 500 which gained 3.26% [1] - The company's shares increased by 17.4% over the past month, outperforming the Business Services sector's gain of 7.61% and the S&P 500's gain of 3.78% [1] Upcoming Earnings - The upcoming earnings disclosure is expected to show an EPS of $0.29, a decrease of 12.12% compared to the same quarter last year [2] - Revenue is forecasted to be $827.19 million, indicating a 4.91% decline year-over-year [2] Full-Year Estimates - Zacks Consensus Estimates predict full-year earnings of $1.24 per share and revenue of $3.6 billion, representing year-over-year changes of +2.48% and +3.01%, respectively [3] Analyst Forecasts - Recent revisions to analyst forecasts are crucial as they reflect changes in short-term business dynamics, with positive revisions indicating analysts' confidence in the company's performance [4] Valuation Metrics - PagSeguro Digital Ltd. has a Forward P/E ratio of 7.96, significantly lower than the industry average of 14.59, suggesting it is trading at a discount [7] - The company holds a PEG ratio of 0.71, compared to the Financial Transaction Services industry's average PEG ratio of 1.19 [8] Industry Ranking - The Financial Transaction Services industry, part of the Business Services sector, has a Zacks Industry Rank of 74, placing it in the top 30% of over 250 industries [9]

Core Viewpoint - PagSeguro Digital Ltd. is experiencing a notable stock performance with a recent increase of 22.49% over the last month, despite a projected decline in earnings and revenue for the upcoming earnings disclosure [1][2]. Group 1: Stock Performance - The stock closed at $9.57, reflecting a -0.73% change compared to the previous day, which is less than the S&P 500's daily loss of 0.64% [1]. - Over the last month, PagSeguro's shares have increased by 22.49%, outperforming the Business Services sector's gain of 0.05% and the S&P 500's gain of 0.38% [1]. Group 2: Earnings and Revenue Estimates - Analysts expect PagSeguro to report earnings of $0.29 per share, indicating a year-over-year decline of 12.12% [2]. - Revenue is projected to be $827.19 million, reflecting a 4.91% drop compared to the same quarter last year [2]. - For the full year, earnings are estimated at $1.24 per share and revenue at $3.6 billion, showing increases of +2.48% and +3.01% respectively from the previous year [3]. Group 3: Analyst Projections and Rankings - Recent shifts in analyst projections for PagSeguro are important as they reflect short-term business trends, with positive revisions indicating optimism about the company's outlook [4]. - The Zacks Rank system currently rates PagSeguro at 3 (Hold), with the Zacks Consensus EPS estimate having decreased by 2.71% in the past month [6]. Group 4: Valuation Metrics - PagSeguro has a Forward P/E ratio of 7.79, which is lower than the industry average of 14.41, indicating it is trading at a discount [7]. - The company has a PEG ratio of 0.69, compared to the Financial Transaction Services industry's average PEG ratio of 1.19 [8].