Core Viewpoint - Investors in the Internet - Software sector may find StoneCo Ltd. (STNE) more attractive than F5 Networks (FFIV) for value investing opportunities [1] Valuation Metrics - StoneCo Ltd. has a Zacks Rank of 1 (Strong Buy), indicating a more favorable earnings estimate revision trend compared to F5 Networks, which has a Zacks Rank of 3 (Hold) [3] - STNE's forward P/E ratio is 10.60, significantly lower than FFIV's forward P/E of 19.83, suggesting STNE may be undervalued [5] - The PEG ratio for STNE is 0.40, while FFIV's PEG ratio is 2.88, indicating STNE's expected earnings growth is more favorable relative to its price [5] - STNE has a P/B ratio of 2.19 compared to FFIV's P/B of 5, further supporting STNE's valuation attractiveness [6] Value Grades - STNE has earned a Value grade of B, while FFIV has a Value grade of D, highlighting STNE's superior valuation metrics [6]

Core Insights - The markets started 2025 positively but have faced increased volatility due to the Trump administration's tariff plans and geopolitical uncertainties, leading to cautious investor behavior [1] Company Analysis - StoneCo Ltd. (STNE) is projected to have a sales growth rate of 10.9% in 2025 and currently holds a Zacks Rank 1, indicating strong buy potential [12] - Cullen/Frost Bankers, Inc. (CFR) is expected to see a sales growth rate of 4.6% in 2025 and also holds a Zacks Rank 1 [13] - Intuit Inc. (INTU) is anticipated to achieve a sales increase of 15.1% in fiscal 2025, the highest among the highlighted stocks, and has a Zacks Rank 1 [14] - The Mosaic Company (MOS) is expected to grow sales by 11.5% in 2025 and currently has a Zacks Rank 2 [15] Investment Strategy - A focus on companies with strong sales growth and high cash balances is essential for identifying potential investment opportunities [6] - Key screening parameters include a 5-Year Historical Sales Growth (%) greater than the industry average and cash flow exceeding $500 million [6] - Additional metrics for stock selection include a P/S Ratio lower than the industry average, positive sales estimate revisions, operating margin greater than 5%, and a Return on Equity (ROE) greater than 5% [7][8][9]

Core Insights - Value investing provides an opportunity to acquire overlooked stocks that are trading at low multiples, particularly using the price-to-book (P/B) ratio as a metric for identifying potential bargains with high-growth prospects [1][2] Understanding P/B Ratio - The P/B ratio is calculated as market capitalization divided by book value of equity, helping to identify low-priced stocks with high growth potential [2] - A P/B ratio of less than one indicates that a stock is undervalued, while a ratio greater than one suggests it may be overvalued [5][6] - The P/B ratio is particularly relevant for industries with tangible assets, such as finance and manufacturing, but may be misleading for companies with high R&D expenditures or significant debt [8] Screening Parameters - Stocks were screened based on several criteria, including a P/B ratio less than the industry median, a P/S ratio lower than the industry average, and a PEG ratio of less than 1, indicating undervaluation relative to growth prospects [11][12][13] - Additional criteria included a minimum current price of $5, an average 20-day trading volume of at least 100,000, and a Zacks Rank of 1 or 2, which indicates strong buy potential [14] Selected Stocks - Five stocks identified with low P/B ratios and strong projected EPS growth include: - **USANA Health Sciences (USNA)**: Projected 3-5 year EPS growth rate of 12.0%, Zacks Rank 2, Value Score A [15] - **CVS Health (CVS)**: Projected 3-5 year EPS growth rate of 11.4%, Zacks Rank 2, Value Score A [16] - **Pfizer (PFE)**: Projected 3-5 year EPS growth rate of 9.0%, Zacks Rank 2, Value Score A [17] - **StoneCo (STNE)**: Highest projected 3-5 year EPS growth rate at 26.3%, Zacks Rank 1, Value Score B [10][18] - **Paysafe Limited (PSFE)**: Projected 3-5 year EPS growth rate of 17.9%, Zacks Rank 2, Value Score A [19]

Financial Performance - For 2025, StoneCo Ltd. has simplified its guidance to focus on adjusted gross profit and adjusted earnings per share (EPS), expecting growth of 14% and 18% year over year respectively [1] - In Q1 2025, gross profit increased by 19% year over year, exceeding yearly guidance, while EPS rose by 36%, nearly double the predicted annual increase [2] - The gross profit-to-TPV ratio improved by 5 basis points to 1.23% in Q1, indicating effective repricing and operational efficiency [4][9] Strategic Initiatives - StoneCo is prioritizing profitability over volume, anticipating a slight slowdown in MSMB TPV growth while aiming for a 14% TPV CAGR by 2027 [3] - The company implemented a cash sweep plan, converting R$6.3 billion of R$8.3 billion in retail deposits into on-platform time deposits to reduce financing costs and improve margins [3] - The credit portfolio expanded to R$1.4 billion with low default rates, aligning with long-term objectives [4] Competitor Outlook - PagSeguro Digital Ltd. expects gross profit growth between 7% and 11% year over year, with EPS growth of 11-15% [5][6] - DLocal Limited projects strong TPV growth of 35-45% year over year, with revenue growth of 25-35% and gross profit improvement of 20-25% [7] Stock Performance and Valuation - Year to date, StoneCo shares have gained 72.2%, significantly outperforming the industry growth of 10.7% and the S&P 500's growth of 1.2% [8] - StoneCo's valuation appears attractive, trading at a forward 12-month price-to-earnings (P/E) ratio of 9.04X, well below the industry average of 39.01X [10]

Industry Overview - Financial technology (fintech) is a transformative investment space merging finance and technology, offering services like online banking, peer-to-peer payments, insurance, cryptocurrency, and cybersecurity [1] - The fintech space is expected to benefit from expanding transaction volumes due to the widespread adoption of digital means, accelerated by the pandemic [2] - The innovative nature of fintech positions it favorably in the evolving financial landscape, with significant growth potential driven by mobile and broadband network expansion [3] Catalysts for Growth - Consumer behavior is shifting towards digital platforms, driven by convenience and cost-effectiveness, which supports fintech's adaptability to changing technological needs [3] - The rise of artificial intelligence (AI) and machine learning is revolutionizing banking, payments, and investments, providing efficient and secure financial solutions [4] Company Highlights BILL Holdings Inc. (BILL) - BILL primarily serves small and medium businesses (SMB) with its AI-enabled financial software platform, benefiting from an expanding clientele and diversified business model [7] - Expected revenue and earnings growth rates for BILL are 13.7% and 11.2%, respectively, for the next year, with a Zacks Consensus Estimate for next-year earnings improving by 5.6% in the last 60 days [10] ACI Worldwide Inc. (ACIW) - ACIW develops software products for facilitating digital payments, powering electronic payments for over 5,000 organizations globally, executing $14 trillion in payments daily [12][13] - Expected revenue and earnings growth rates for ACIW are 7.1% and 7.2%, respectively, for the current year, with a Zacks Consensus Estimate for current-year earnings improving by 1.1% in the last 60 days [13] Shift4 Payments Inc. (FOUR) - Shift4 Payments provides software and payment processing solutions, offering omni-channel card acceptance and processing across multiple payment types [14] - Expected revenue and earnings growth rates for FOUR are 26% and 43.4%, respectively, for the current year, with a Zacks Consensus Estimate for current-year earnings improving by 17.2% in the last 60 days [16] OppFi Inc. (OPFI) - OppFi operates as a specialty finance platform for community banks, providing access to credit for consumers turned away by mainstream options [17] - Expected revenue and earnings growth rates for OPFI are 10% and 29.5%, respectively, for the current year, with a Zacks Consensus Estimate for current-year earnings improving by 15% in the last 60 days [18] StoneCo Ltd. (STNE) - StoneCo is a leading provider of point-of-sale payment processing services, empowering businesses to accept various payment methods and manage accounts [20] - Expected revenue and earnings growth rates for STNE are 10.9% and 4.4%, respectively, for the current year, with a Zacks Consensus Estimate for current-year earnings improving by 11.9% in the last 60 days [21]

Core Insights - StoneCo Ltd. experienced significant deposit growth in Q1 2025, driven by increased usage of the Pix payment system, strategic bundling, and a cash sweep strategy [1][7] - The company's total client deposits reached R$8.3 billion, marking a 38% year-over-year increase, despite a seasonal dip of 5% [1][7] - StoneCo's cash sweep strategy is expected to yield an annual net benefit of 75-125 basis points per R$1 billion converted to time deposits, enhancing funding efficiency and credit portfolio growth [2][7] Deposit Growth and Strategy - The surge in Pix transaction volume, which increased by 95% year-over-year, has significantly outpaced card transaction growth, leading to higher client deposit flows [1] - Deposits accounted for 6.9% of the total payment volume from micro, small, and medium-sized businesses, continuing to grow faster than payment volumes [1] - The cash sweep strategy, initiated in late Q1, aims to convert retail deposits into on-platform time deposits, supporting reduced funding expenses and improved margins [2][3] Competitive Landscape - Nu Holdings Ltd. reported a 48% year-over-year increase in deposits, reaching $31.6 billion, driven by growth in Mexico and Colombia [4] - MercadoLibre, Inc. leveraged Pix to enhance deposit growth, offering attractive remuneration on balances, which increased monthly active fintech users to 64 million, up over 30% year-over-year [5] Stock Performance and Valuation - Year-to-date, StoneCo's shares have gained 80%, outperforming the industry growth of 13.2% and the S&P 500's growth of 2.1% [6] - The stock trades at a forward 12-month price-to-earnings (P/E) ratio of 9.45X, significantly lower than the industry average of 39.61X, indicating an attractive valuation [8]

Despite significant volatility caused by the environment, StoneCo ( STNE ) nearly tripled its revenue from 2020 and also became profitable, in not the best scenario. Now, the company targets a significant ramp-up in profit which could potentially makeAs of 2025, I've got over 10 years of researching companies. In total, throughout my investing life, I estimate that I researched (in depth) well over 1000 companies, from commodities like oil, natural gas, gold and copper to tech like Google or Nokia and many ...

Key Takeaways StoneCo repriced nearly all clients in Q1 to align pricing with Brazil's 15% yield curve. STNE's gross profit rose 19% and EPS jumped 36%, both exceeding full-year guidance due to repricing. STNE's Financial Services revenues grew 20%, driven by repricing, with stable MSMB market share.In the first quarter of 2025, StoneCo Ltd. (STNE) strategically executed a broad repricing initiative aimed at preserving profitability in the face of higher interest rates and a widened yield curve from late ...

Core Insights - StoneCo Ltd. is positioned to benefit from the rapid growth of the global fintech market, projected to grow from $340.10 billion in 2024 to over $1.12 trillion by 2032 at a CAGR of 16.2% [1] - The company's business model aligns with trends in cloud computing, AI-driven fraud detection, and mobile-first financial services, particularly in emerging markets [2] - StoneCo's stock has increased by approximately 54.9% in the past three months, outperforming the broader Internet-Software industry and key fintech peers [3][8] Financial Performance - StoneCo's first-quarter 2025 results showed a 19% year-over-year increase in gross profit, exceeding the annual guidance of 14%, and a 36% increase in earnings per share, doubling the projected growth rate [6] - Client deposits rose by 38% year-over-year to R$8.3 billion, with significant growth in PIX transactions, which increased by 95% and are now monetized like debit payments [7][8] Valuation and Market Position - StoneCo is currently trading 11.6% below its average price target according to nine analysts, indicating potential upside [9] - The stock's price/earnings ratio is at 9.26X forward earnings, significantly lower than its five-year high of 87.87X and below the industry average of 37.60 [12] - StoneCo's discounted valuation relative to peers and historical averages positions it as an attractive investment opportunity [14]

Market Overview - The three major U.S. indexes ended the holiday-shortened trading week in the red, with the Nasdaq Composite declining by 0.44%, and both the S&P 500 and Dow Jones Industrial Average losing 0.17% each, attributed to renewed trade tensions with the European Union and China [1] - The Federal Reserve's May meeting minutes indicate that new foreign trade tariff policies could lead to persistent inflation, hinder economic growth, and diminish global confidence in U.S. assets [2] Economic Indicators - The second estimate of Q1 2025 Gross Domestic Product (GDP) showed a contraction at an annual rate of 0.2%, an improvement from the initial estimate of a 0.3% decline, marking the first drop in three years [2] - The labor market remains resilient but shows slight signs of weakening, with jobless aid rising to 240,000 for the week ending May 24th, and Continuing Jobless Claims increasing to 1.92 million [2] Stock Performance - Banco Comercial Português (BPCGY) shares gained 13.9% since being upgraded to Zacks Rank 2 (Buy) on March 31, outperforming the S&P 500's 6.1% increase [3] - PDS Biotechnology Corporation (PDSB) also saw a return of 9.5% since its upgrade to Zacks Rank 2 on March 31 [4] - A hypothetical portfolio of Zacks Rank 1 (Strong Buy) stocks returned -8.32% in 2025 (through May 5), compared to -5.35% for the S&P 500 index [4] Zacks Recommendations - StoneCo Ltd. (STNE) and BlackBerry Limited (BB) advanced 30.9% and 26.1% respectively since their Zacks Recommendation upgrades to Outperform on April 9 and March 4 [7] - The Zacks Focus List portfolio has returned -3.23% through April 30, 2025, compared to -4.92% for the S&P 500 index [11] - The Zacks Earnings Certain Admiral Portfolio (ECAP) returned +3.20% in Q1 2025, outperforming the S&P 500 index's -4.30% decline [15] Long-term Performance - The Zacks Focus List portfolio has produced an annualized return of +11.33% since 2004, compared to +9.95% for the S&P 500 index [13] - The Top 10 portfolio has delivered a cumulative return of +1832.3% since 2012, significantly outperforming the S&P 500 index's +434.2% return [23]