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It is doubtless a positive to see that the PagSeguro Digital Ltd. (NYSE:PAGS) share price has gained some 59% in the last three months. But that doesn't change the fact that the returns over the last year have been less than pleasing. The cold reality is that the stock has dropped 21% in one year, under-performing the market.
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Even though the PagSeguro Digital share price is down over the year, its EPS actually improved. Of course, the situation might betray previous over-optimism about growth. The divergence between the EPS and the share price is quite notable, during the year. But we might find some different metrics explain the share price movements better.
PagSeguro Digital's revenue is actually up 56% over the last year. Since the fundamental metrics don't readily explain the share price drop, there might be an opportunity if the market has overreacted.
The chart below shows how revenue and earnings have changed with time, (if you click on the chart you can see the actual values).
PagSeguro Digital is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. If you are thinking of buying or selling PagSeguro Digital stock, you should check out this free report showing analyst consensus estimates for future profits.
A Different Perspective
While PagSeguro Digital shareholders are down 21% for the year, the market itself is up 10%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Putting aside the last twelve months, it's good to see the share price has rebounded by 59%, in the last ninety days. This could just be a bounce because the selling was too aggressive, but fingers crossed it's the start of a new trend. Before deciding if you like the current share price, check how PagSeguro Digital scores on these 3 valuation metrics.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.