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Key Information for PayPal Investors

It hasn't been a great morning session for PayPal investors, who have watched their shares sink by -2.3% to a price of $79.78. Some of you might be wondering if it's time to buy the dip. If you are considering this, make sure to check the company's fundamentals first to determine if the shares are fairly valued at today's prices.

a Very Low P/E Ratio but Its Shares Are Expensive:

PayPal Holdings, Inc. operates a technology platform that enables digital payments on behalf of merchants and consumers worldwide. The company belongs to the Consumer Discretionary sector, which has an average price to earnings (P/E) ratio of 22.6 and an average price to book (P/B) ratio of 3.19. In contrast, PayPal has a trailing 12 month P/E ratio of 19.4 and a P/B ratio of 3.99.

PayPal's PEG ratio is 1.53, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.

Strong Revenue Growth and an Average Current Ratio:

2018 2019 2020 2021 2022 2023
Revenue (M) $15,451 $17,772 $21,454 $25,371 $27,518 $29,771
Operating Margins 14% 15% 15% 17% 14% 17%
Net Margins 13% 14% 20% 16% 9% 14%
Net Income (M) $2,057 $2,459 $4,202 $4,169 $2,419 $4,246
Net Interest Expense (M) $77 $115 $209 $232 $304 $347
Depreciation & Amort. (M) $776 $912 $1,189 $1,265 $1,317 $1,072
Diluted Shares (M) 1,196 1,187 1,191 1,186 1,158 1,107
Earnings Per Share $1.71 $2.07 $3.54 $3.52 $2.09 $3.84
EPS Growth n/a 21.05% 71.01% -0.56% -40.63% 83.73%
Avg. Price $82.6 $105.07 $161.52 $254.17 $108.51 $79.12
P/E Ratio 47.47 50.27 45.12 71.6 51.67 20.55
Free Cash Flow (M) $4,657 $3,367 $5,353 $4,889 $5,107 $4,220
CAPEX (M) $823 $704 $866 $908 $706 $623
EV / EBITDA 31.5 33.29 43.23 54.37 25.04 14.77
Total Debt (M) $1,998 $4,965 $8,939 $8,049 $10,417 $9,676
Net Debt / EBITDA -1.88 -0.66 0.93 0.52 0.51 0.1
Current Ratio 1.27 1.43 1.33 1.22 1.28 1.29

PayPal benefits from rapidly growing revenues and decreasing reinvestment in the business, decent operating margins with a stable trend, and a strong EPS growth trend. The company's financial statements show generally positive cash flows and healthy leverage levels. Furthermore, PayPal has just enough current assets to cover current liabilities, as shown by its current ratio of 1.29.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.

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