Core Viewpoint - StoneCo Ltd. is positioned as a strong investment opportunity due to its improving earnings outlook and analysts' increasing earnings estimates [1][2]. Earnings Estimates - Analysts are optimistic about StoneCo's earnings prospects, leading to higher estimates that are expected to positively impact the stock price [2]. - The current-quarter earnings estimate is projected at $0.32 per share, reflecting a year-over-year increase of +6.67%. Over the last 30 days, the consensus estimate has risen by 14.29% with no negative revisions [5]. - For the full year, the earnings estimate stands at $1.38 per share, indicating a year-over-year change of +2.22%. Similar to the current quarter, there have been no negative revisions in the past month [6]. Zacks Rank - StoneCo holds a Zacks Rank 1 (Strong Buy), indicating strong agreement among analysts in revising earnings estimates upward, which has led to significant improvements in consensus estimates [3][7]. - The Zacks Rank system has a proven track record, with Zacks 1 Ranked stocks averaging an annual return of +25% since 2008 [3]. Stock Performance - StoneCo shares have increased by 18.4% over the past four weeks, suggesting investor confidence in the company's earnings growth potential [8].

Core Viewpoint - Analyst recommendations play a significant role in influencing stock prices, but their reliability is questionable due to potential biases from brokerage firms [1][5][10]. Group 1: Analyst Recommendations - StoneCo Ltd. (STNE) has an average brokerage recommendation (ABR) of 1.67, indicating a consensus between Strong Buy and Buy, with 77.8% of the nine recommendations being Strong Buy [2][5]. - Brokerage analysts tend to exhibit a strong positive bias in their ratings, often issuing five "Strong Buy" recommendations for every "Strong Sell" [6][10]. - The ABR may not be a reliable standalone indicator for investment decisions, as studies suggest it has limited success in guiding investors toward stocks with high price appreciation potential [5][10]. Group 2: Zacks Rank vs. ABR - The Zacks Rank, which ranges from 1 (Strong Buy) to 5 (Strong Sell), is based on earnings estimate revisions and is considered a more reliable indicator of near-term stock performance compared to ABR [8][9][11]. - The Zacks Rank is updated more frequently than the ABR, reflecting timely changes in analysts' earnings estimates, which correlate strongly with stock price movements [12][11]. - StoneCo has achieved a Zacks Rank 1 (Strong Buy) due to a 9.5% increase in the Zacks Consensus Estimate for the current year, indicating positive sentiment among analysts regarding the company's earnings prospects [13][14].

Core Viewpoint - StoneCo Ltd. reported quarterly earnings of $0.34 per share, exceeding the Zacks Consensus Estimate of $0.32 per share, and showing an increase from $0.29 per share a year ago, indicating a positive earnings surprise of 6.25% [1] Financial Performance - The company posted revenues of $625.86 million for the quarter ended March 2025, which was 1.45% below the Zacks Consensus Estimate, but slightly up from $623.12 million a year ago [2] - Over the last four quarters, StoneCo has surpassed consensus EPS estimates three times and topped consensus revenue estimates three times as well [2] Stock Performance - StoneCo shares have increased approximately 66% since the beginning of the year, contrasting with a decline of 4.3% in the S&P 500 [3] Future Outlook - The company's earnings outlook is crucial for investors, with current consensus EPS estimates at $0.32 for the coming quarter and $1.38 for the current fiscal year, with revenues expected to be $675.52 million and $2.7 billion respectively [7] - The estimate revisions trend for StoneCo is currently favorable, leading to a Zacks Rank 1 (Strong Buy) for the stock, suggesting expected outperformance in the near future [6] Industry Context - The Internet - Software industry, to which StoneCo belongs, is currently ranked in the top 37% of over 250 Zacks industries, indicating a favorable environment for stock performance [8]

Financial Data and Key Metrics Changes - The company reported a 19% year-over-year growth in revenues and a 2% quarter-over-quarter increase, despite typical seasonality in Q1 [11] - Adjusted gross profit also grew by 19% year-over-year but decreased by 3% sequentially, primarily due to lower quarter-over-quarter TPV and higher service costs [11] - Adjusted net income increased by 23% year-over-year but decreased by 17% quarter-over-quarter, attributed to lower adjusted gross profit and higher investments in distribution channels [11][12] - Adjusted basic EPS was BRL1.97 per share, reflecting a 36% year-over-year increase but a 13% sequential decrease [12] - The company repurchased BRL843 million worth of shares during the quarter, contributing to a distribution yield of 12% over the past twelve months [8][12] Business Line Data and Key Metrics Changes - The Financial Services segment saw revenues grow by 20% year-over-year, driven by repricing initiatives, while adjusted EBT for this segment grew by 21% [18] - The Software segment's revenues increased by 11% year-over-year, mainly due to higher recurring revenues and an increase in the active client base [19] - The MSNB payments active client base grew by 17% year-over-year, reaching 4.3 million clients, with transaction volumes for MSNB cards growing by 10% and PIX volumes by 95% [12][13] Market Data and Key Metrics Changes - Total client deposits reached BRL8.3 billion, a 30% year-over-year increase but a 5% sequential decrease due to seasonality [14] - The company’s total credit portfolio reached BRL1.4 billion, with a focus on working capital offerings to SMB clients [17] - The coverage ratio for provisions was 256%, indicating a stabilization in risk management practices [17] Company Strategy and Development Direction - The company is focused on profitability and has implemented a disciplined capital allocation strategy, including a new share repurchase program of up to BRL2 billion [9][8] - The strategy includes a shift towards time deposits to optimize funding costs and improve capital structure [15][16] - The company aims to enhance its service offerings and distribution capabilities to maintain competitive advantages in the market [54] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a challenging macroeconomic environment with rising interest rates but expressed confidence in the company's ability to navigate these challenges [10] - The company expects some deceleration in TPV growth due to repricing efforts and macroeconomic conditions, but overall trends align with long-term guidance [32] - Management emphasized the importance of maintaining a rational competitive environment and focusing on client-centric solutions [5][6] Other Important Information - The company has begun migrating retail deposits to time deposits as part of its cash sweep strategy, which is expected to yield benefits in future quarters [91] - The effective tax rate for the quarter was 19.7%, down from 20.6% in the previous year, reflecting improved tax management [24] Q&A Session Summary Question: Outlook for TPV growth - Management indicated that TPV growth is expected to decelerate somewhat due to higher interest rates and repricing efforts, but overall trends remain in line with long-term guidance [32] Question: Negotiations regarding LINX - Management confirmed ongoing negotiations with Totus regarding LINX, but specific details on valuation and timing could not be disclosed [35] Question: Impact of competition from Mercado Pago and Fiserv - Management noted that while competition is monitored closely, they have not seen significant impacts on their core MSMB segment from new entrants [60][66] Question: Pricing strategy in light of changing yield curves - Management stated that they do not plan to adjust pricing policies despite recent changes in the yield curve, as the majority of repricing has already been implemented [46] Question: Cash conversion and net cash position - Management explained that the decline in net cash was due to seasonal effects and one-off expenses, with expectations for improved cash generation in future quarters [78][81]

Financial Data and Key Metrics Changes - The company reported a 19% year-over-year revenue growth and a 2% quarter-over-quarter growth, despite typical seasonality effects [10] - Adjusted gross profit also grew by 19% year-over-year but decreased by 3% sequentially, primarily due to lower transaction volumes and increased costs [10] - Adjusted net income increased by 23% year-over-year but decreased by 17% quarter-over-quarter, attributed to lower adjusted gross profit and higher investments [10] - Adjusted basic EPS was BRL1.97 per share, reflecting a 36% increase year-over-year but a 13% decrease sequentially [10] Business Line Data and Key Metrics Changes - The Financial Services segment saw revenues grow by 20% year-over-year, driven by repricing initiatives [18] - The Software segment's revenues increased by 11% year-over-year, mainly due to higher recurring revenues and an increase in the active client base [19] - The MSNB payments active client base grew by 17% year-over-year, reaching 4.3 million clients [11] Market Data and Key Metrics Changes - Total client deposits reached BRL8.3 billion, a 30% increase year-over-year but a 5% decrease sequentially due to seasonality [13] - The company’s distribution yield reached 12% over the past twelve months, indicating strong capital allocation strategy [7] Company Strategy and Development Direction - The company is focused on profitability and has implemented a disciplined capital allocation strategy, including a new share repurchase program of up to BRL2 billion [8] - The strategy includes a cash sweep initiative to convert retail deposits into time deposits, optimizing funding costs and capital structure [14][15] - The company aims to prioritize profitability over pure volume growth in response to changes in the repricing policy [12] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a challenging macroeconomic environment with rising interest rates but expressed confidence in navigating these challenges [9] - The company expects some deceleration in TPV growth due to repricing efforts and macroeconomic conditions, but overall trends align with long-term guidance [31] - Management remains optimistic about the long-term growth potential, targeting a 14% CAGR for TPV until 2027 [49] Other Important Information - The company repurchased BRL843 million worth of shares during the quarter, contributing to a total of BRL2.4 billion in share buybacks over the past twelve months [7] - The effective tax rate was 19.7%, down from 20.6% in the previous year, reflecting improved tax efficiency [24] Q&A Session Summary Question: Outlook for TPV growth - Management indicated that TPV growth is expected to decelerate somewhat due to repricing efforts and macroeconomic challenges, but overall trends are in line with long-term guidance [31][32] Question: Negotiations regarding LINX - Management confirmed ongoing negotiations with Totus for the sale of LINX, with positive progress but no specific timeline available [36] Question: Impact of competition from Mercado Pago and Fiserv - Management noted that while competition is monitored closely, they have not seen significant impacts from global players entering the market [63] Question: Cash conversion and net cash position - Management explained that the decline in net cash was due to seasonal effects and one-off items, with expectations for improved cash generation in future quarters [78][82] Question: Take rates and financial income - Management stated that take rates are becoming less relevant as a metric, focusing instead on adjusted gross profit relative to TPV, which showed a slight increase [84]

Financial Performance - StoneCo's Adjusted Gross Profit for 1Q25 reached R$1645 billion, a 19% increase year-over-year[11] - Adjusted Basic EPS for 1Q25 was R$197 per share, a 36% increase year-over-year[11] - Total Revenue for 1Q25 was R$36699 billion, a 19% increase year-over-year[28] - Adjusted Net Income for 1Q25 was R$554 million, a 23% increase year-over-year[13] Business Growth - MSMB Payments Client Base increased by 17% year-over-year[15] - MSMB TPV reached R$103 billion in 1Q25, a 10% increase year-over-year[15] - Retail Deposits increased by 38% year-over-year[18] - Credit Portfolio increased by 20% quarter-over-quarter[20] Capital Allocation - R$24 billion was distributed to shareholders via buyback and 12% distribution yield (LTM)[11] - A new R$2 billion share buyback program was announced[11] Future Guidance - The company projects MSMB TPV to exceed R$670 billion by 2027, representing a 14% CAGR from 2024-2027[38] - The company projects Adjusted Basic EPS to exceed R$150 per share by 2027, representing a 27% CAGR from 2024-2027[38]

Core Viewpoint - StoneCo Ltd. reported its financial results for the first quarter of 2025, highlighting its performance and future outlook [1]. Financial Results - The financial results for the first quarter ended March 31, 2025, were released and are available on the company's Investor Relations website [1]. - A teleconference to discuss these results is scheduled for May 8, 2025, at 5:00 PM ET [2]. Conference Call Details - The conference call can be accessed via Zoom and by phone, with specific dial-in numbers provided for the U.S., Brazil, and the UK [3]. - A live webcast of the call will be available, along with a replay shortly after the call concludes [3]. Company Overview - Stone Co. is recognized as a leading provider of financial technology solutions, offering services that enable merchants to conduct commerce across various channels [4].

Parkev Tatevosian, CFA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends StoneCo. The Motley Fool has a disclosure policy. Parkev Tatevosian is an affiliate of The Motley Fool and may be compensated for promoting its services. If you choose to subscribe through his link, he will earn some extra money that supports his channel. His opinions remain his own and are unaffected by The Motley Fool. ...

Core Viewpoint - In times of market volatility, value investing becomes a preferred strategy as investors seek to buy undervalued stocks when others are selling at lower prices [1][2]. Value Investing Strategy - Value investors capitalize on market uncertainty by purchasing stocks at discounted prices when other investors sell [1]. - The strategy can lead to "value traps" if not understood properly, where stocks underperform due to persistent issues rather than temporary problems [3]. Importance of PEG Ratio - The PEG ratio, defined as (Price/Earnings)/Earnings Growth Rate, is a crucial metric for value investors, as a low PEG ratio indicates better value [5]. - Unlike P/E alone, the PEG ratio helps identify a stock's intrinsic value, although it has limitations regarding changing growth rates [5]. Screening Criteria for Value Stocks - Effective screening for value stocks includes criteria such as: - PEG Ratio less than industry median - P/E Ratio less than industry median - Zacks Rank 1 (Strong Buy) or 2 (Buy) - Market Capitalization greater than $1 billion - Average 20-Day Volume greater than 50,000 - Percentage Change in F1 Earnings Estimate Revisions greater than 5% - Value Score of A or B combined with a Zacks Rank of 1, 2, or 3 [6]. Selected Stocks - **Barrick Gold (GOLD)**: A leading gold mining company with 3.9 million ounces of gold and 195,000 tons of copper produced in 2024, holding 89 million ounces of proven and probable gold reserves. It has a Zacks Rank 2 and a Value Score of A, with a five-year expected growth rate of 33.5% [8][9]. - **StoneCo (STNE)**: A financial technology company in Brazil providing various financial services. It has a Zacks Rank 1 and a Value Score of B, with a long-term expected growth rate of 26.3% [9][10]. - **Synovus Financial (SNV)**: A diverse financial services company with a Zacks Rank 2 and a Value Score of A, boasting a five-year expected growth rate of 10.2% [11][12]. - **BGC Group, Inc. (BGC)**: A financial brokerage and technology company with a long-term expected earnings growth rate of 24.7%, holding a Value Score of B and a Zacks Rank of 1 [12][13].

Core Insights - The article compares two Internet - Software stocks, StoneCo Ltd. (STNE) and Informatica Inc. (INFA), to determine which is more attractive to value investors [1]. Valuation Metrics - StoneCo Ltd. has a Zacks Rank of 1 (Strong Buy), indicating a positive earnings outlook, while Informatica Inc. has a Zacks Rank of 3 (Hold) [3]. - STNE has a forward P/E ratio of 10.88, significantly lower than INFA's forward P/E of 15.46, suggesting STNE may be undervalued [5]. - The PEG ratio for STNE is 0.41, compared to INFA's PEG ratio of 2.18, indicating STNE's expected earnings growth is more favorable [5]. - STNE's P/B ratio is 1.94, while INFA's P/B ratio is 2.83, further supporting STNE's valuation advantage [6]. - Based on these metrics, STNE holds a Value grade of B, whereas INFA has a Value grade of D, highlighting STNE's superior valuation profile [6]. Earnings Outlook - STNE is noted for its improving earnings outlook, which enhances its attractiveness in the Zacks Rank model [7].