PagSeguro Digital Ltd. (PAGS) Stock Analysis and Metrics

Sector: Technology Industry: Software - Infrastructure CIK: 0001712807

Market Cap 3.39 Bn

P/B 1.23

P/E 8.25

P/S 0.91

ROIC (Qtr) 65.08

Div Yield % 0.00

Rev 1y % (Qtr) 7.24

Total Debt (Qtr) 7.76 Bn

Debt/Equity (Qtr) 2.81

About

PagSeguro Digital Ltd., with its ticker symbol PAGS, is a prominent player in the financial technology sector, specializing in services for consumers, individual entrepreneurs, micro-merchants, and small and medium-sized enterprises (SMEs) in Brazil. The company's business model is centered on providing a secure, seamless, digital, mobile-first, and affordable ecosystem that combines payments and financial services. PagSeguro's primary business activities encompass a full acquiring company, a digital platform, a cross-border payment service provider...

PagSeguro Digital Ltd., with its ticker symbol PAGS, is a prominent player in the financial technology sector, specializing in services for consumers, individual entrepreneurs, micro-merchants, and small and medium-sized enterprises (SMEs) in Brazil. The company's business model is centered on providing a secure, seamless, digital, mobile-first, and affordable ecosystem that combines payments and financial services.

PagSeguro's primary business activities encompass a full acquiring company, a digital platform, a cross-border payment service provider (PSP), and multiple digital banking services. The company's offerings include payment solutions, digital banking, cards, credit offerings, investments, and insurance. These services cater to a diverse clientele, which includes individual entrepreneurs, micro-merchants, SMEs, and consumers.

Revenue for PagSeguro is generated through various segments, such as payment solutions, digital banking, cards, credit offerings, investments, and insurance. Its payment solutions are user-friendly, secure, and affordable, supporting a variety of payment methods, including credit and debit cards, meal vouchers, boletos, peer-to-peer and wire transfers, and bank debits. These payment solutions are accessible through the PagBank digital account, offering a wide array of features such as bill payments, mobile phone top-ups, and peer-to-peer cash transfers.

PagSeguro's digital banking services comprise checking accounts, savings accounts, card issuance, credit offerings, investments, and insurance. The company's digital bank, PagBank, provides payment and banking services through its mobile app, enabling customers to manage finances, make payments, and invest in various financial products.

Within the industry, PagSeguro boasts several competitive advantages, including strong brand recognition, user-friendly products and services, and a vast distribution network. Its mobile-first approach has allowed the company to reach an extensive customer base, making it a key player in the Brazilian banking market.

Key competitors for PagSeguro include other digital payment providers like Nubank and traditional banks such as Banco do Brasil and Itaú Unibanco.

PagSeguro's customers primarily consist of individual entrepreneurs, micro-merchants, SMEs, and consumers. They are drawn to the company's convenient and secure payment solutions, as well as its diverse range of financial products and services.

Throughout this essay, various products and services offered by PagSeguro Digital Ltd. have been mentioned, including payment solutions, digital banking, cards, credit offerings, investments, and insurance. These brands and trade names contribute to the company's robust ecosystem, designed to cater to the financial needs of its varied clientele.

Price action

Investment thesis

Bull case

Operating cash flow of 933.91M provides strong 47.27x coverage of stock compensation 19.76M, indicating sustainable incentive practices.
Strong operating cash flow of 933.91M provides 1.86x coverage of SG&A expenses 501.60M, showing efficient operational cost management.
Tangible assets of 12.84B provide exceptional 607.51x coverage of deferred revenue 21.14M, showing strong service capability backing.
Operating cash flow of 933.91M provides strong 5023.71x coverage of inventory 185899.81, indicating efficient inventory management.
Operating cash flow of 933.91M provides strong 44.18x coverage of deferred revenue 21.14M, indicating service delivery capability.

Bear case

Operating cash flow of 933.91M barely covers its investment activities of (349.11M), with a coverage ratio of -2.68, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
High receivables of 11.02B relative to inventory of 185899.81 (59283.73 ratio) suggests aggressive credit terms or collection difficulties, potentially masking revenue quality issues.
Free cash flow of 520.10M represents just -3.17x of debt issuance (164.18M), suggesting concerning reliance on leverage rather than internal cash generation for growth.
Operating cash flow of 933.91M is outpaced by equity issuance of (204.24M) (-4.57 ratio), indicating concerning reliance on equity markets for funding operations.
Cash position of 264.81M provides weak coverage of payables of 2.12B, which is 0.13x, indicating potential working capital stress and supplier relationship risks.

Peer comparison

Companies in the Software - Infrastructure

S.No.	Ticker	Company	Market Cap	P/E	P/S	Total Debt (Qtr)
1	MSFT	Microsoft Corp	3,197.34 Bn	26.81	10.47	57.61 Bn
2	ORCL	Oracle Corp	506.93 Bn	48.84	12.87	124.39 Bn
3	PLTR	Palantir Technologies Inc.	341.64 Bn	311.89	87.69	0.24 Bn
4	PANW	Palo Alto Networks Inc	118.39 Bn	105.97	12.39	0.35 Bn
5	CRWD	CrowdStrike Holdings, Inc.	109.19 Bn	-347.56	23.92	0.82 Bn
6	SNPS	Synopsys Inc	76.22 Bn	57.21	10.80	14.29 Bn
7	FTNT	Fortinet, Inc.	62.40 Bn	33.30	9.52	1.00 Bn
8	NET	Cloudflare, Inc.	60.91 Bn	-591.17	30.25	3.50 Bn

Industry comparisons

Current Valuation	Value	Ind Avg
EV to Assets EV to Assets	0.15	2.36
EV to Cash from Ops. EV/CFO	2.22	6.76
EV to Debt EV to Debt	0.27	-7.44
EV to EBIT EV/EBIT	1.51	-6.97
EV to EBITDA EV/EBITDA	1.18	7.81
EV to Free Cash Flow [EV/FCF] EV/FCF	3.99	27.96
EV to Market Cap EV to Market Cap	0.61	0.43
EV to Revenue EV/Rev	0.56	32.94
Price to Book Value [P/B] P/B	1.24	3.89
Price to Earnings [P/E] P/E	8.31	-24.42

Dividend Metrics	Value	Ind Avg
Dividend Coverage Ratio Div Coverage (Qtr)	0.00	0.26
Dividend Payout Ratio % Div Payout % (Qtr)	0.00	2.68
Dividend per Basic Share Div per Share (Qtr)	0.00	0.10
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr)	0.00	1.68
Interest Coverage Int. cover (Qtr)	1.50	-11.97

Growth Metrics	Value	Ind Avg
Capex Growth (1y) % Capex 1y % (Qtr)	1.68	-406.35
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr)	101.15	220.63
Dividend Growth (1y) % Dividend Growth (1y) %	0.00	-0.28
EBIAT Growth (1y) % EBIAT 1y % (Qtr)	34.54	19.33
EBITDA Growth (1y) % EBITDA 1y % (Qtr)	24.35	42.98
EBIT Growth (1y) % EBIT 1y % (Qtr)	29.19	13.70
EBT Growth (1y) % EBT 1y % (Qtr)	7.65	7.87
EPS Growth (1y) % EPS 1y % (Qtr)	18.33	68.92
FCF Growth (1y) % FCF 1y % (Qtr)	196.36	306.88
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr)	19.14	47.85

Liquidity Ratios	Value	Ind Avg
Asset Utilization Ratio Asset Util Ratio (Qtr)	0.05	0.67
Cash Payout Ratio Cash Payout (Qtr)	0.00	0.01
Cash Ratio Cash Ratio (Qtr)	0.03	1.21
Current Ratio Curr Ratio (Qtr)	1.42	2.59
Debt to Equity Ratio Debt/Equity (Qtr)	2.81	-0.95
Interest Cover Ratio Int Coverage (Qtr)	1.50	-11.97
Times Interest Earned Times Interest Earned (Qtr)	1.50	-11.97

Profitability	Value	Ind Avg
EBITDA Margin % EBITDA Margin % (Qtr)	45.60	-550.34
EBIT Margin % EBIT Margin % (Qtr)	198.50	-242.82
EBT Margin % EBT Margin % (Qtr)	12.27	-608.89
Gross Margin % Gross Margin % (Qtr)	51.60	51.79
Net Profit Margin % Net Margin % (Qtr)	11.00	-611.54

Research Tools