Is PagSeguro Digital Ltd. (NYSE:PAGS) Potentially Undervalued?
PagSeguro Digital Ltd. (NYSE:PAGS), might not be a large cap stock, but it saw significant share price movement during recent months on the NYSE, rising to highs of US$17.55 and falling to the lows of US$10.04. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether PagSeguro Digital's current trading price of US$10.98 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at PagSeguro Digital’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
View our latest analysis for PagSeguro Digital
What Is PagSeguro Digital Worth?
Good news, investors! PagSeguro Digital is still a bargain right now according to my price multiple model, which compares the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that PagSeguro Digital’s ratio of 15.64x is below its peer average of 28.26x, which indicates the stock is trading at a lower price compared to the IT industry. Although, there may be another chance to buy again in the future. This is because PagSeguro Digital’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
Can we expect growth from PagSeguro Digital?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 96% over the next couple of years, the future seems bright for PagSeguro Digital. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What This Means For You
Are you a shareholder? Since PAGS is currently below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. With a positive outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current price multiple.
Are you a potential investor? If you’ve been keeping an eye on PAGS for a while, now might be the time to make a leap. Its prosperous future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy PAGS. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed investment decision.
In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. For instance, we've identified 3 warning signs for PagSeguro Digital (1 makes us a bit uncomfortable) you should be familiar with.
If you are no longer interested in PagSeguro Digital, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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