Now trading at a price of $62.75, PayPal has moved -2.2% so far today.
PayPal returned losses of -34.0% last year, with its stock price reaching a high of $103.03 and a low of $58.95. Over the same period, the stock underperformed the S&P 500 index by -43.0%. As of April 2023, the company's 50-day average price was $67.81. PayPal Holdings, Inc. operates a technology platform that enables digital payments on behalf of merchants and consumers worldwide. Based in San Jose, CA, the large-cap Consumer Discretionary company has 29,900 full time employees. PayPal has not offered a dividend during the last year.
EPS Trend Sustained Primarily by Reducing the Number of Shares Outstanding:
| 2020-02-06 | 2021-02-05 | 2022-02-03 | 2023-02-10 | |
|---|---|---|---|---|
| Revenue (MM) | $17,772 | $21,454 | $25,371 | $27,518 |
| Operating Margins | 23.5% | 24.1% | 21.2% | 20.4% |
| Net Margins | 13.84% | 19.59% | 16.43% | 8.79% |
| Net Income (MM) | $2,459 | $4,202 | $4,169 | $2,419 |
| Net Interest Expense (MM) | n/a | n/a | n/a | n/a |
| Depreciation & Amort. (MM) | -$912 | -$1,189 | -$1,265 | -$1,317 |
| Earnings Per Share | $2.07 | $3.54 | $3.51 | $2.32 |
| EPS Growth | n/a | 71.01% | -0.85% | -33.9% |
| Diluted Shares (MM) | 1,188 | 1,187 | 1,187 | 1,116 |
| Free Cash Flow (MM) | $4,758 | $6,965 | $6,700 | $6,514 |
| Capital Expenditures (MM) | -$687 | -$746 | -$903 | -$701 |
| Net Current Assets (MM) | $4,091 | $679 | -$1,502 | -$926 |
| Current Ratio | 1.43 | 1.33 | 1.22 | 1.28 |
| Long Term Debt (MM) | $4,965 | $8,939 | $8,049 | $10,417 |
| LT Debt to Equity | 0.29 | 0.45 | 0.37 | 0.51 |
PayPal has growing revenues and a flat capital expenditure trend and strong margins with a stable trend. Additionally, the company's financial statements display a steady stream of strong cash flows and healthy debt levels. However, the firm has EPS growth achieved by reducing the number of outstanding shares. Finally, we note that PayPal has just enough current assets to cover current liabilities.
PayPal's Valuation Is in Line With Its Sector Averages:
PayPal has a trailing twelve month P/E ratio of 29.2, compared to an average of 22.33 for the Consumer Discretionary sector. Based on its EPS guidance of $5.65, the company has a forward P/E ratio of 12.0. According to the 22.2% compound average growth rate of PayPal's historical and projected earnings per share, the company's PEG ratio is 1.31. Taking the weighted average of the company's EPS CAGR and the broader market's 5-year projected EPS growth rate, we obtain a normalized growth rate of 10.4%. On this basis, the company's PEG ratio is 2.82. This suggests that these shares are overvalued. Furthermore, PayPal is likely overvalued compared to the book value of its equity, since its P/B ratio of 3.52 is higher than the sector average of 3.12. The company's shares are currently trading 85.2% above their Graham number. In conclusion, PayPal's impressive cash flow trend, decent P/B ratio, and reasonable use of leverage demonstrate that the company may still be fairly valued — despite its elevated earnings multiple.
PayPal Has an Average Rating of Buy:
The 39 analysts following PayPal have set target prices ranging from $58.0 to $126.0 per share, for an average of $86.52 with a buy rating. As of April 2023, the company is trading -21.6% away from its average target price, indicating that there is an analyst consensus of strong upside potential.
PayPal has a very low short interest because 1.8% of the company's shares are sold short. Institutions own 75.8% of the company's shares, and the insider ownership rate stands at 0.21%, suggesting a small amount of insider investors. The largest shareholder is Vanguard Group Inc, whose 9% stake in the company is worth $6,032,497,103.
