Pagseguro Digital (PAGS) AI Stock Analysis

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Pagseguro Digital

(NYSE:PAGS)

81Outperform

Pagseguro Digital demonstrates strong financial performance with significant revenue and profit growth, despite cash flow challenges. Technical analysis indicates positive market momentum, and the valuation suggests the stock may be undervalued. The earnings call reinforced an optimistic outlook with strategic initiatives to overcome macroeconomic challenges. Overall, the stock is well-positioned for potential growth, with a need for improved cash flow management.

Positive Factors

Earnings Guidance

The company guided for GAAP EPS growth of 11-15%, significantly above consensus expectations, indicating confidence in operating leverage gain and gross profit growth.

Financial Performance

The net income increased by 23% year-over-year, which was 13% above expectations, driven by solid revenue growth and deceleration of operating expenses.

Negative Factors

Financial Expenses

Total expenses grew by 19% year-over-year, with an acceleration of financial expenses due to higher average interest rates.

Operating Margins

Operating margins are pressured by investments, marketing, and funding costs.

Pagseguro Digital (PAGS) vs. S&P 500 (SPY)

Market Cap

$3.20B

Dividend YieldN/A

Average Volume (3M)4.29M

Price to Earnings (P/E)7.8

Beta (1Y)1.23

Revenue Growth8.26%

EPS Growth20.41%

CountryUS

Employees6,751

SectorTechnology

Sector Strength65

IndustrySoftware - Infrastructure

Share Statistics

EPS (TTM)0.35

Shares Outstanding209,148,910

10 Day Avg. Volume4,959,315

30 Day Avg. Volume4,287,345

Financial Highlights & Ratios

PEG RatioN/A

Price to Book (P/B)N/A

Price to Sales (P/S)0.00

Price to Cash Flow (P/CF)0.00

P/FCF Ratio0.00

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$10.67

Price Target Upside11.73% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering4

Pagseguro Digital Business Overview & Revenue Model

Company DescriptionPagSeguro Digital Ltd. is a leading financial technology company headquartered in Brazil, primarily serving the Brazilian market. It operates in the financial services sector, offering a comprehensive suite of digital payment solutions. The company's core products include point-of-sale (POS) devices, mobile payment solutions, and online payment processing services. PagSeguro aims to simplify financial transactions for small and medium-sized businesses, entrepreneurs, and individual consumers, providing tools that facilitate cashless payments and enhance financial inclusion.

How the Company Makes MoneyPagSeguro Digital generates revenue through a diversified business model centered on its payment processing services. The company earns money by charging transaction fees on payments processed through its POS devices and digital platforms. These fees are typically a percentage of the transaction value plus a fixed fee per transaction. Additionally, PagSeguro offers value-added services such as working capital loans, prepaid cards, and insurance products, which contribute to its revenue streams. The company has established significant partnerships with major banks and financial institutions, enabling it to broaden its service offerings and enhance its market reach. By leveraging its technology and extensive merchant network, PagSeguro continues to capitalize on the increasing adoption of digital payments in Brazil.

Pagseguro Digital Key Performance Indicators (KPIs)

Any

Total Clients

Total Clients
Tracks the total number of clients, providing a measure of market penetration and the company’s ability to attract and retain customers.

Chart InsightsPagSeguro Digital's client base has shown consistent growth, reaching 33.2 million by the end of 2024, driven by strategic initiatives despite macroeconomic challenges. The earnings call highlights a robust performance with record TPV and net income growth, supported by effective repricing strategies and cost management. However, concerns around transaction yields due to PIX and client mix changes pose potential risks. Looking ahead, the company expects continued growth in gross profit and EPS, focusing on revenue enhancement and cost optimization to navigate the challenging economic environment.

Data provided by:

Main Street Data

Pagseguro Digital Financial Statement Overview

Summary

Pagseguro Digital shows a strong income statement performance with consistent revenue and profit growth, underpinned by efficient operations. The balance sheet remains stable with a healthy mix of debt and equity. However, cash flow challenges highlight potential liquidity risks, necessitating careful management of capital expenditures and operational cash flows. Overall, the company is well-positioned in the software industry, with opportunities for improvement in cash management.

Income Statement

―

Pagseguro Digital demonstrates strong revenue growth with a 16.93% increase in revenue from 2023 to 2024. The company maintains healthy profit margins with a gross profit margin of 47.94% and a net profit margin of 11.54% for 2024. EBIT and EBITDA margins are also robust at 32.50% and 41.13%, respectively, indicating efficient operational performance. The consistent growth trajectory and profitability highlight the company's strong market position.

Balance Sheet

The balance sheet shows a stable financial position with a debt-to-equity ratio of 0.32, reflecting a manageable level of leverage. The equity ratio stands at 20.11%, suggesting a solid capital structure. Return on equity is at 14.42%, indicating effective use of shareholders' equity to generate profits. While the company has increased liabilities, the equity growth counters potential risks, maintaining overall stability.

Cash Flow

―

Pagseguro Digital faces challenges in cash flow management, with a negative free cash flow of -4.55 billion in 2024, compared to 2.01 billion in 2023, indicating significant capital outlays or operational adjustments. The operating cash flow to net income ratio is negative, reflecting cash flow issues despite profitability. However, the company's strategic investments may yield future benefits, offsetting current cash flow concerns.

Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
18.33B	15.68B	15.16B	10.30B	6.69B
	Gross Profit
8.79B	7.55B	7.69B	4.52B	2.91B
	EBIT
5.96B	5.39B	5.07B	2.12B	1.73B
	EBITDA
7.54B	6.72B	6.19B	2.89B	2.11B
	Net Income Common Stockholders
2.12B	1.65B	1.50B	1.17B	1.29B
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
1.42B	2.90B	2.95B	2.58B	2.62B
	Total Assets
72.90B	55.11B	45.57B	31.15B	22.32B
	Total Debt
4.68B	16.38B	12.12B	4.22B	838.14M
	Net Debt
3.75B	13.48B	10.28B	2.42B	-801.92M
	Total Liabilities
58.23B	41.87B	33.67B	20.62B	13.00B
	Stockholders Equity
14.67B	13.24B	11.91B	10.53B	9.32B
Cash Flow		Free Cash Flow
-4.55B	2.01B	1.39B	-883.46M	106.85M
	Operating Cash Flow
-3.42B	4.00B	3.59B	929.18M	2.17B
	Investing Cash Flow
-1.83B	-2.70B	-2.25B	-1.53B	-1.88B
	Financing Cash Flow
3.27B	-225.99M	-1.31B	764.59M	-45.09M

Pagseguro Digital Technical Analysis

Technical Analysis Sentiment

Positive

Last Price9.55

Price Trends

50DMA

8.36

Positive

100DMA

7.69

Positive

200DMA

8.66

Positive

Market Momentum

MACD

0.43

Positive

RSI

59.79

Neutral

STOCH

44.08

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For PAGS, the sentiment is Positive. The current price of 9.55 is above the 20-day moving average (MA) of 9.17, above the 50-day MA of 8.36, and above the 200-day MA of 8.66, indicating a bullish trend. The MACD of 0.43 indicates Positive momentum. The RSI at 59.79 is Neutral, neither overbought nor oversold. The STOCH value of 44.08 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for PAGS.

Pagseguro Digital Risk Analysis

Pagseguro Digital disclosed 66 risk factors in its most recent earnings report. Pagseguro Digital reported the most risks in the “Finance & Corporate” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Pagseguro Digital Peers Comparison

Overall Rating

UnderperformOutperform

Sector (60)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
PAGS	81 Outperform	$3.20B	7.82	15.39%	―	8.26%	20.41%
DLO	74 Outperform	$2.55B	19.57	26.10%	―	33.84%	0.29%
PAY	73 Outperform	$4.39B	87.96	10.80%	―	47.78%	74.61%
PAYO	69 Neutral	$2.61B	22.10	15.97%	―	14.86%	-0.94%
MQ	65 Neutral	$1.83B	82.80	2.34%	―	-25.02%	―
STNE	63 Neutral	$3.61B	8.73	-9.48%	―	-8.52%	-180.71%
Sector *	60 Neutral	$10.77B	10.41	-6.71%	2.99%	7.69%	-13.12%

* Technology Sector Average

Performance Comparison

PAGS

Pagseguro Digital

9.55

-3.32

-25.80%

STNE

Stoneco

13.23

-3.74

-22.04%

PAYO

Payoneer

6.16

0.28

4.76%

PAY

Paymentus Holdings

35.32

15.96

82.44%

Marqeta

4.09

-1.75

-29.97%

DLO

DLocal

8.88

-4.85

-35.32%

Pagseguro Digital Earnings Call Summary

Earnings Call Date:Feb 20, 2025

(Q4-2024)

% Change Since: 17.03%|

Next Earnings Date:May 29, 2025

Earnings Call Sentiment Positive

The earnings call demonstrated a robust performance with record TPV growth, increased net income, and strong client acquisition. Despite challenges like a higher-than-expected SELIC rate and concerns around transaction yields, the company effectively implemented strategies such as repricing and cost of funding reduction to maintain profitability.

Q4-2024 Updates

Positive Updates

Record TPV Growth

Total Payment Volume (TPV) reached a record of BRL 518 billion, representing a 32% year-over-year growth.

Strong Client Growth

PagBank ended the year with 33.2 million clients, adding 2.1 million year-over-year.

Net Income and EPS Increase

Net income reached BRL 2.3 billion, a 28% growth compared to 2023, with diluted EPS growing 30%.

Banking Revenue Surge

Banking revenue set a record of BRL 513 million, growing 58% year-over-year, with gross profit from the banking segment increasing by 80%.

Successful Repricing Strategy

Strategic repricing helped mitigate the impact of higher interest rates and contributed to managing the product mix impact.

Cost of Funding Reduction

The APY for total deposits decreased by 400 basis points compared to Q4 '23, reducing the total cost of deposits to 90% of the CDI.

Negative Updates

High SELIC Rate Impact

Contrary to initial projections, the SELIC rate ended more than 300 basis points higher than anticipated, affecting financial costs.

Transaction Yield Concerns

Transaction activities revenue decreased by 8% year-over-year, suggesting a lower take rate, partly attributed to PIX and client mix changes.

Company Guidance

During the fourth quarter of 2024 earnings call for PagSeguro Digital, the company reported impressive financial performance and provided guidance for 2025. The company ended the year with 33.2 million clients, an increase of 2.1 million year-over-year. Their payment TPV reached a record BRL 518 billion, marking a 32% growth from the previous year. Net revenues rose by 18% to BRL 18.8 billion, while net income hit an all-time high of BRL 2.3 billion, a 28% increase compared to 2023. The diluted EPS on a GAAP basis climbed to BRL 6.62, representing a 30% growth. PagSeguro's return on average equity improved by 198 basis points year-over-year to 15.2%. For 2025, the company provided guidance with expectations of gross profit growth between 7% and 11%, earnings per share growth between 11% and 15%, and capital expenditures ranging from BRL 2.2 billion to BRL 2.4 billion. The company's strategic initiatives focused on increasing revenues, enhancing shareholder value, and optimizing cost structures to navigate the challenging macroeconomic environment.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.