Key Takeaways StoneCo shares have jumped 64.3% in a year, outpacing the S&P 500 and InternetSoftware industry.The company boosted adjusted net income, expanded MSMB and banking clients, and grew its credit portfolio. StoneCo trades well below its historical and industry P/E levels as earnings estimates trend higher. Shares of StoneCo Ltd. (STNE) have surged an impressive 64.3% over the past year, leaving both the S&P 500 composite’s 16.3% rally and the Internet–Software industry’s modest 4.7% rise far behin ...

Core Insights - StoneCo Ltd. has experienced a significant share price increase of 44% over the past three months, outperforming the S&P 500's 7.7% gain and the Internet-Software industry's 2.1% rise [1][9] - The company's strategic focus on its core fintech operations and divestment of non-core software units has positioned it to target a total addressable market of BRL 100 billion, with substantial growth potential remaining [3][9] Financial Performance - In Q2 2025, StoneCo reported a 27% year-over-year increase in adjusted net income, with a return on equity (ROE) of 22%, and the financial services division achieving an ROE of 30% [5] - The company has repurchased nearly BRL 2.6 billion in shares over the past year, indicating management's confidence in its growth trajectory [6][9] Business Segments - The micro, small, and medium business (MSMB) payments segment has seen a 17% year-over-year increase in active clients, reaching 4.5 million, with total payment volume growing by 12% [10] - The banking ecosystem is also expanding, with active banking clients increasing by 23% to 3.3 million and client deposits rising by 36% [11] - StoneCo's credit portfolio grew by 25% sequentially to BRL 1.8 billion, supported by a 41% increase in merchant working capital loans, while maintaining healthy non-performing loan ratios [12][13] Valuation and Market Position - StoneCo's stock is currently trading at a forward P/E of 9.93X, significantly below its three-year high of 31.33X and the industry average of 38.37X, indicating it may be undervalued [15] - The Zacks Consensus Estimate for earnings per share for 2025 and 2026 has been revised upward, reflecting positive sentiment around the company's growth prospects [14] Investment Outlook - StoneCo's recent performance is supported by strong fundamentals, rising profitability, and a focused strategy, making it a compelling growth story in Latin America [18][19] - With a Zacks Rank of 1 (Strong Buy), it is considered an opportune time for investors to capitalize on StoneCo's momentum before its full upside potential is realized [20]