PagSeguro Digital Stock Gives Every Indication Of Being Modestly Overvalued
- By GF Value
The stock of PagSeguro Digital (NYSE:PAGS, 30-year Financials) is believed to be modestly overvalued, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus' estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. If the price of a stock is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price of $46.3 per share and the market cap of $15.2 billion, PagSeguro Digital stock appears to be modestly overvalued. GF Value for PagSeguro Digital is shown in the chart below.
Because PagSeguro Digital is relatively overvalued, the long-term return of its stock is likely to be lower than its business growth, which averaged 10.6% over the past three years and is estimated to grow 22.50% annually over the next three to five years.
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Investing in companies with poor financial strength has a higher risk of permanent loss of capital. Thus, it is important to carefully review the financial strength of a company before deciding whether to buy its stock. Looking at the cash-to-debt ratio and interest coverage is a great starting point for understanding the financial strength of a company. PagSeguro Digital has a cash-to-debt ratio of 10000.00, which is better than 100% of the companies in Software industry. GuruFocus ranks the overall financial strength of PagSeguro Digital at 8 out of 10, which indicates that the financial strength of PagSeguro Digital is strong. This is the debt and cash of PagSeguro Digital over the past years:
It poses less risk to invest in profitable companies, especially those that have demonstrated consistent profitability over the long term. A company with high profit margins is also typically a safer investment than one with low profit margins. PagSeguro Digital has been profitable 7 over the past 10 years. Over the past twelve months, the company had a revenue of $1.3 billion and earnings of $0.763 a share. Its operating margin is 26.06%, which ranks better than 93% of the companies in Software industry. Overall, GuruFocus ranks the profitability of PagSeguro Digital at 8 out of 10, which indicates strong profitability. This is the revenue and net income of PagSeguro Digital over the past years: