StoneCo Ltd. (NASDAQ: STNE ), a Brazilian fintech company in which Berkshire Hathaway ( BRK.A ) took a stake in the IPO, has been one of my preferred international fintech stocks for a while now. Although I did complete a profitableDilantha De Silva is an experienced equity analyst and investment researcher with over 10 years in the investment industry. He writes insightful articles for Seeking Alpha, GuruFocus, TipRanks, and ValueWalk, with a significant following on Seeking Alpha. Dilantha’s expertise spa ...

Company Performance - StoneCo Ltd. ended the recent trading session at $14.87, showing a -1.98% change from the previous day's closing price, underperforming the S&P 500 which lost 0.4% [1] - Prior to the recent trading, shares of StoneCo had gained 0.53%, lagging behind the Computer and Technology sector's gain of 6.34% and the S&P 500's gain of 4.97% [1] Upcoming Earnings - The upcoming earnings release for StoneCo Ltd. is scheduled for August 7, 2025, with analysts expecting earnings of $0.34 per share, indicating a year-over-year growth of 13.33% [2] - The consensus estimate for quarterly revenue is projected at $671.49 million, reflecting a 9.16% increase from the same period last year [2] Full Year Projections - For the full year, Zacks Consensus Estimates project earnings of $1.44 per share and revenue of $2.73 billion, representing changes of +6.67% and +10.94% respectively from the previous year [3] - Recent adjustments to analyst estimates for StoneCo Ltd. indicate evolving short-term business trends, with positive revisions suggesting optimism about the business outlook [3] Valuation Metrics - StoneCo Ltd. is currently trading at a Forward P/E ratio of 10.53, which is a discount compared to the industry average Forward P/E of 28.28 [6] - The company's PEG ratio stands at 0.42, significantly lower than the average PEG ratio of 2.18 for the Internet - Software industry [6] Industry Ranking - The Internet - Software industry, which includes StoneCo Ltd., ranks in the top 26% of all industries according to the Zacks Industry Rank, with a current rank of 64 [7] - Research indicates that the top 50% rated industries outperform the bottom half by a factor of 2 to 1 [7]

Core Insights - StoneCo Ltd. (STNE) shares have surged 108.7%, significantly outperforming the Internet–Software industry and the S&P 500, which rose around 16.2% and 5.2% respectively [1] - The stock's impressive performance positions StoneCo ahead of major fintech rivals like PagSeguro Digital (PAGS) and DLocal Limited (DLO) [1][2] Company Performance - StoneCo is strategically positioned to benefit from the booming global fintech industry, with the market projected to grow from $340.1 billion in 2024 to over $1.12 trillion by 2032, reflecting a CAGR of 16.2% [4] - The company has seen a 17% year-over-year increase in active clients in its payments business, reaching 4.3 million, and a 17% growth in total payment volume (TPV) [6] - Retail deposits reached R$8.3 billion, up 38% year over year, with R$6.3 billion in time deposits as part of a "cash sweep" strategy [7] Financial Metrics - StoneCo's total credit portfolio reached R$1.4 billion, with non-performing loans (NPLs) over 90 days at a controlled 4.57% [9] - The company's software segment revenues grew 11% year over year, with adjusted EBITDA rising 12% [10] - STNE trades at a forward P/E of 10.67X, significantly below its three-year high of 32.69X and the industry average of 40.58X [13] Strategic Initiatives - Management has executed R$843 million in share buybacks, lifting total repurchases over the past 12 months to R$2.4 billion, indicating a robust 12% distribution yield [12] - The company is witnessing stronger adoption of its financial services, with 38% of clients classified as heavy users by the end of Q1 [11] Market Position - StoneCo's integrated solutions and expanding ecosystem position it well for long-term growth as fintech adoption accelerates across Latin America [14] - The average brokerage recommendation for StoneCo is 1.67 on a scale of 1 to 5, with 77.78% of recommendations being Strong Buy [18][21]

Group 1 - StoneCo Ltd. will announce its second quarter 2025 financial results on August 07, 2025, after market close [1] - A conference call to discuss the financial results will take place on the same day at 5:00 PM ET [1] - The company will enter a Quiet Period related to its second quarter 2025 financial results starting July 23, 2025 [3] Group 2 - Stone is recognized as a leading provider of financial technology and software solutions, enabling merchants to conduct commerce across multiple channels [4]

Company Performance - StoneCo Ltd. closed at $16.18, with a gain of +1.13% from the previous trading session, outperforming the S&P 500 which gained 0.83% [1] - The stock has increased by 15.69% over the past month, while the Computer and Technology sector gained 8.25% and the S&P 500 gained 4.99% during the same period [1] Upcoming Earnings - The upcoming EPS for StoneCo Ltd. is projected at $0.34, indicating a 13.33% increase compared to the same quarter of the previous year [2] - Revenue is anticipated to be $671.49 million, reflecting a 9.16% increase from the same quarter last year [2] Fiscal Year Estimates - For the entire fiscal year, earnings are estimated at $1.44 per share, representing a +6.67% change from the previous year [3] - Revenue for the fiscal year is projected at $2.73 billion, indicating a +10.94% change from the prior year [3] Analyst Estimates - Recent adjustments to analyst estimates for StoneCo Ltd. reflect short-term business trends, with positive revisions indicating analysts' confidence in the company's performance [4] - The Zacks Rank system, which assesses these estimate changes, currently ranks StoneCo Ltd. at 2 (Buy) [6] Valuation Metrics - StoneCo Ltd. has a Forward P/E ratio of 11.11, which is a discount compared to the industry average Forward P/E of 28.74 [7] - The company has a PEG ratio of 0.44, significantly lower than the Internet - Software industry average PEG ratio of 2.22 [7] Industry Context - The Internet - Software industry, part of the Computer and Technology sector, has a Zacks Industry Rank of 46, placing it in the top 19% of over 250 industries [8] - Research indicates that the top 50% rated industries outperform the bottom half by a factor of 2 to 1 [8]

Core Concept - The price-to-book (P/B) ratio is a key metric for value investors to identify undervalued stocks with potential for exceptional returns, calculated as market price per share divided by book value per share [1][5] Understanding Book Value - Book value represents the total value remaining for shareholders if a company were to liquidate its assets after settling all liabilities, calculated by subtracting total liabilities from total assets [3][4] P/B Ratio Insights - A P/B ratio under 1.0 indicates a potentially undervalued stock, while a ratio above 1.0 suggests overvaluation [5][6] - Stocks with low P/B ratios can indicate strong growth prospects, but a low ratio may also reflect weak asset returns or overstated assets [7][8] Screening Parameters for Value Stocks - Stocks should have a P/B ratio lower than the industry median, a P/S ratio below the industry median, and a P/E ratio using F(1) estimates lower than the industry median [11][12] - A PEG ratio under 1 indicates undervaluation relative to growth prospects, and stocks must trade at a minimum price of $5 [13] - High trading volume and favorable Zacks Rank (1 or 2) are also important criteria for screening [14] Identified Low P/B Stocks - Centene Corporation (CNC) has a projected 3-5 year EPS growth rate of 11.5% and holds a Zacks Rank of 2 with a Value Score of A [16] - CVS Health (CVS) has a projected EPS growth rate of 11.4% and also holds a Zacks Rank of 2 with a Value Score of A [16] - The ODP Corporation (ODP) has a projected EPS growth rate of 14% and holds a Zacks Rank of 1 with a Value Score of A [17] - StoneCo (STNE) has a projected EPS growth rate of 25.3% and holds a Zacks Rank of 2 with a Value Score of B [18] - Paysafe Limited (PSFE) has a projected EPS growth rate of 17.9% and holds a Zacks Rank of 1 with a Value Score of A [19]

Company Overview - StoneCo Ltd. (STNE) currently has a Momentum Style Score of B, indicating potential for strong performance based on recent trends [3] - The company holds a Zacks Rank of 2 (Buy), suggesting it is positioned favorably in the market [4] Price Performance - Over the past week, STNE shares have increased by 5.52%, while the Zacks Internet - Software industry remained flat [6] - In a longer time frame, STNE's monthly price change is 12.53%, significantly outperforming the industry's 0.69% [6] - Over the past quarter, STNE shares have risen by 45.18%, and over the last year, they have gained 28.11%, compared to the S&P 500's increases of 8.73% and 13.86%, respectively [7] Trading Volume - The average 20-day trading volume for STNE is 6,293,092 shares, which serves as a bullish indicator when combined with rising stock prices [8] Earnings Outlook - In the past two months, two earnings estimates for STNE have been revised upwards, with no downward revisions, leading to an increase in the consensus estimate from $1.38 to $1.44 [10] - For the next fiscal year, two estimates have also moved upwards, indicating positive sentiment regarding future earnings [10] Conclusion - Given the strong price performance, positive earnings outlook, and favorable momentum indicators, STNE is recommended as a stock to consider for near-term investment [12]

Core Viewpoint - The article discusses the reliability of Wall Street analysts' recommendations, particularly focusing on StoneCo Ltd. (STNE), and emphasizes the importance of using these recommendations in conjunction with other research tools like Zacks Rank to make informed investment decisions [1][5]. Group 1: Brokerage Recommendations - StoneCo has an average brokerage recommendation (ABR) of 1.67, indicating a rating between Strong Buy and Buy, based on recommendations from nine brokerage firms [2]. - Out of the nine recommendations, seven are classified as Strong Buy, accounting for 77.8% of the total recommendations [2]. Group 2: Limitations of Brokerage Recommendations - Solely relying on brokerage recommendations for investment decisions may not be advisable, as studies indicate these recommendations often lack success in guiding investors towards stocks with significant price appreciation potential [5]. - Brokerage firms tend to exhibit a positive bias in their ratings due to vested interests, with a ratio of five "Strong Buy" recommendations for every "Strong Sell" [6][10]. Group 3: Zacks Rank as an Alternative - Zacks Rank categorizes stocks into five groups based on earnings estimate revisions, providing a more effective indicator of a stock's near-term price performance compared to ABR [8][11]. - The Zacks Rank is timely and reflects the latest earnings estimates, unlike ABR, which may not be up-to-date [13]. Group 4: Current Earnings Estimates for StoneCo - The Zacks Consensus Estimate for StoneCo's current year earnings has increased by 0.7% over the past month to $1.44, indicating growing optimism among analysts regarding the company's earnings prospects [14]. - The recent change in consensus estimates, along with other factors, has resulted in a Zacks Rank of 2 (Buy) for StoneCo, suggesting a positive outlook for the stock [15].

Core Insights - StoneCo Ltd. (STNE) is experiencing growth driven by continuous product innovation, enhancing its digital ecosystem to better serve micro, small, and medium-sized businesses (MSMBs) in Brazil [1][4] Product Innovations - Key innovations include the Pix QR Code solution for instant peer-to-merchant payments, TapTon for mobile payment acceptance, Payment Link for personalized payment URLs, and Web Checkout for improved online shopping experiences [1][2] - Additional offerings include a POS Gateway for in-store payments, a Payment Service Provider platform for marketplaces, and Split Payments to divide transactions among multiple recipients [2] Market Trends - StoneCo's software portfolio is well-positioned to benefit from Brazil's rapid transition to digital payments, with a 95% year-over-year increase in Pix transaction volume and a 10% rise in card transactions in Q1 2025 [3][8] - The company's cloud-based POS and ERP platforms are becoming essential for merchants moving away from cash [3] Competitive Landscape - Competitors like MercadoLibre, Inc. and NU Holdings Ltd. are also expanding their digital payment solutions, with Mercado Pago offering a comprehensive suite of services and Nubank providing secure, one-click checkouts and mobile POS solutions [5][6] Stock Performance - Year-to-date, StoneCo's shares have increased by 87.6%, significantly outperforming the industry growth of 14.2% and the S&P 500's growth of 3% [7] Valuation - StoneCo's stock is trading at a forward 12-month price-to-earnings (P/E) ratio of 9.78X, which is lower than the industry average of 40.16X, indicating an attractive valuation [10]

Core Insights - StoneCo (STNE) and PayPal (PYPL) are leading fintech companies focusing on digital payments, with StoneCo primarily in Latin America and PayPal operating globally [1] - Both companies are expanding their services beyond core payments to include value-added financial services for merchants and consumers [1] Performance Comparison - Over the past 30 days, StoneCo shares increased by 12.7%, outperforming the broader sector's 4.9% gain and the S&P 500's 2.8% rise, while PayPal shares rose by 3.1% [5][7] StoneCo's Competitive Advantages - StoneCo is leveraging localized execution and operational discipline in Brazil, enhancing customer experience through product innovation and expanding its acquiring infrastructure [6][8] - The company has identified R$3 billion in excess capital and has returned approximately R$1 billion year-to-date through aggressive share repurchase programs, with a total of R$2.4 billion in buybacks over the past 12 months [8] PayPal's Strategic Transformation - Under CEO Alex Chriss, PayPal is undergoing a cultural shift that emphasizes agility and product focus, leading to improvements in core product innovation and branded checkout experiences [9][12] - Despite progress, PayPal faces challenges in unbranded checkout and mobile market share losses, particularly against competitors like Apple Pay and Shopify [12] Valuation Analysis - StoneCo is trading at a forward 12-month price-to-earnings (P/E) ratio of 9.80, significantly below its five-year median of 20.76, while PayPal's forward P/E is 13.46, also below its five-year median of 20.62 [15] - Both companies are undervalued compared to the sector's forward P/E of 25.96, with StoneCo trading at a greater discount relative to both PayPal and the sector [15] Investment Outlook - StoneCo is highlighted as a strong buy due to its innovation, disciplined capital allocation, and favorable valuation, while PayPal is rated as a hold amid ongoing transformation challenges [17][18] - The strategic execution of StoneCo in Brazil's expanding digital economy, along with robust shareholder returns, presents a more immediate upside potential compared to PayPal [18]