StoneCo Eyes 18% EPS Growth in 2025: What's Fueling It?

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]