NASDAQ:PYPL is a prime example of a stock that offers more than what meets the eye in terms of fundamentals.

Last update: Oct 30, 2023

PAYPAL HOLDINGS INC (NASDAQ:PYPL) is a hidden gem identified by our stock screening tool, featuring undervaluation and robust fundamentals. NASDAQ:PYPL showcases decent financial health and profitability, coupled with an attractive price. Let's dig deeper into the analysis.

Looking at the Valuation

ChartMill assigns a proprietary Valuation Rating to each stock. The score is computed by evaluating various valuation aspects, like price to earnings and free cash flow, both absolutely as relative to the market and industry. NASDAQ:PYPL was assigned a score of 8 for valuation:

Based on the Price/Earnings ratio of 10.84, the valuation of PYPL can be described as reasonable.
63.37% of the companies in the same industry are more expensive than PYPL, based on the Price/Earnings ratio.
PYPL's Price/Earnings ratio indicates a rather cheap valuation when compared to the S&P500 average which is at 24.48.
A Price/Forward Earnings ratio of 8.81 indicates a reasonable valuation of PYPL.
Based on the Price/Forward Earnings ratio, PYPL is valued a bit cheaper than the industry average as 62.38% of the companies are valued more expensively.
PYPL's Price/Forward Earnings ratio indicates a rather cheap valuation when compared to the S&P500 average which is at 18.10.
80.20% of the companies in the same industry are more expensive than PYPL, based on the Enterprise Value to EBITDA ratio.
Based on the Price/Free Cash Flow ratio, PYPL is valued a bit cheaper than 61.39% of the companies in the same industry.
The low PEG Ratio(NY), which compensates the Price/Earnings for growth, indicates a rather cheap valuation of the company.
The decent profitability rating of PYPL may justify a higher PE ratio.
PYPL's earnings are expected to grow with 15.92% in the coming years. This may justify a more expensive valuation.

Understanding NASDAQ:PYPL's Profitability

ChartMill assigns a Profitability Rating to every stock. This score ranges from 0 to 10 and evaluates the different profitability ratios and margins, both absolutely, but also relative to the industry peers. NASDAQ:PYPL scores a 7 out of 10:

With an excellent Return On Assets value of 5.46%, PYPL belongs to the best of the industry, outperforming 81.19% of the companies in the same industry.
PYPL has a Return On Equity of 20.73%. This is amongst the best in the industry. PYPL outperforms 88.12% of its industry peers.
PYPL has a Return On Invested Capital of 10.43%. This is amongst the best in the industry. PYPL outperforms 87.13% of its industry peers.
The 3 year average ROIC (8.61%) for PYPL is below the current ROIC(10.43%), indicating increased profibility in the last year.
The Profit Margin of PYPL (14.27%) is better than 66.34% of its industry peers.
PYPL's Operating Margin of 16.68% is fine compared to the rest of the industry. PYPL outperforms 61.39% of its industry peers.
The Gross Margin of PYPL (41.30%) is better than 67.33% of its industry peers.

Deciphering NASDAQ:PYPL's Health Rating

ChartMill employs a unique Health Rating system for all stocks. This rating, ranging from 0 to 10, is determined by analyzing various liquidity and solvency ratios. For NASDAQ:PYPL, the assigned 5 for health provides valuable insights:

Looking at the Altman-Z score, with a value of 1.79, PYPL is in the better half of the industry, outperforming 75.25% of the companies in the same industry.
PYPL has a debt to FCF ratio of 3.09. This is a good value and a sign of high solvency as PYPL would need 3.09 years to pay back of all of its debts.
PYPL has a better Debt to FCF ratio (3.09) than 75.25% of its industry peers.

Growth Insights: NASDAQ:PYPL

To evaluate a stock's growth potential, ChartMill utilizes a Growth Rating on a scale of 0 to 10. This comprehensive assessment considers various growth aspects, including historical and estimated EPS and revenue growth. NASDAQ:PYPL has achieved a 6 out of 10:

PYPL shows a strong growth in Earnings Per Share. In the last year, the EPS has been growing by 15.38%, which is quite good.
Measured over the past years, PYPL shows a quite strong growth in Earnings Per Share. The EPS has been growing by 16.68% on average per year.
PYPL shows quite a strong growth in Revenue. In the last year, the Revenue has grown by 8.21%.
The Revenue has been growing by 16.01% on average over the past years. This is quite good.
PYPL is expected to show quite a strong growth in Earnings Per Share. In the coming years, the EPS will grow by 16.29% yearly.
The Revenue is expected to grow by 10.39% on average over the next years. This is quite good.

Every day, new Decent Value stocks can be found on ChartMill in our Decent Value screener.

For an up to date full fundamental analysis you can check the fundamental report of PYPL

Disclaimer

This is not investing advice! The article highlights some of the observations at the time of writing, but you should always make your own analysis and invest based on your own insights.