PayPal Holdings, Inc. (NASDAQ: PYPL)

Sector: Financial Services Industry: Credit Services CIK: 0001633917
Market Cap 58.35 Bn
P/B 2.89
P/E 11.87
P/S 1.78
ROIC (Qtr) 15.50
Div Yield % 0.23
Rev 1y % (Qtr) 7.26
Total Debt (Qtr) 11.28 Bn
Debt/Equity (Qtr) 0.56

About

PayPal Holdings, Inc., commonly known as PayPal, operates as a leading technology platform that facilitates digital payments and simplifies commerce experiences for merchants and consumers globally. The company was established in Delaware in 2015 and remains dedicated to democratizing financial services to improve the financial health of individuals and expand economic opportunities for businesses of all sizes. PayPal's primary business activities revolve around offering a range of products and services that simplify payment transactions and related...

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Price action

Investment thesis

Bull case

  • Strong operating cash flow of 6.43B provides robust 0.57x coverage of total debt 11.28B, indicating excellent debt servicing capability and financial flexibility.
  • Strong tangible asset base of 68.63B provides 6.09x coverage of total debt 11.28B, indicating robust asset backing and low credit risk.
  • Robust free cash flow of 5.57B exceeds capital expenditure of 857M by 6.50x, indicating strong organic growth funding capability.
  • Retained earnings of 31.16B provide full 2.76x coverage of long-term debt 11.28B, indicating strong internal capital position.
  • Robust tangible asset base of 68.63B provides 4.50x coverage of working capital 15.25B, indicating strong operational backing.

Bear case

  • Investment activities of 3.55B provide weak support for R&D spending of 3.07B, which is 1.16x, suggesting potentially insufficient investment in innovation relative to other capital deployment.
  • Free cash flow of 5.57B represents just -5.76x of debt issuance (967M), suggesting concerning reliance on leverage rather than internal cash generation for growth.
  • Long-term investments of 3.60B represent a high 2.17x of fixed assets 1.66B, indicating potential overexposure to financial assets versus operational capabilities.
  • Cash position of 8.99B provides weak coverage of payables of 40.88B, which is 0.22x, indicating potential working capital stress and supplier relationship risks.
  • Retained earnings of 31.16B provide limited buffer against comprehensive income items of (700M), which is -44.52x, indicating elevated exposure to market risks.

Peer comparison

Companies in the Credit Services
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 V Visa Inc. 685.45 Bn 34.17 17.14 25.17 Bn
2 MA Mastercard Inc 520.38 Bn 36.52 16.53 18.98 Bn
3 AXP American Express Co 266.36 Bn 25.27 4.08 59.23 Bn
4 COF Capital One Financial Corp 111.93 Bn 102.41 3.87 51.48 Bn
5 PYPL PayPal Holdings, Inc. 58.35 Bn 11.87 1.78 11.28 Bn
6 SYF Synchrony Financial 32.00 Bn 9.16 3.32 14.43 Bn
7 SOFI SoFi Technologies, Inc. 29.56 Bn 46.17 8.90 2.81 Bn
8 ALLY Ally Financial Inc. 14.44 Bn 52.52 1.83 20.63 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 0.79 1.03
EV to Cash from Ops. EV/CFO 9.80 4.72
EV to Debt EV to Debt 5.58 2.99
EV to EBIT EV/EBIT 10.36 -246.63
EV to EBITDA EV/EBITDA 9.03 -62.30
EV to Free Cash Flow [EV/FCF] EV/FCF 11.31 7.33
EV to Market Cap EV to Market Cap 1.08 10.21
EV to Revenue EV/Rev 1.92 10.01
Price to Book Value [P/B] P/B 2.89 3.47
Price to Earnings [P/E] P/E 11.87 13.86
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Dividend Coverage Ratio 0.00 1.59
Dividend Payout Ratio % Div Payout % (Qtr) 0.00 2.22
Dividend per Basic Share Div per Share (Qtr) 0.00 0.68
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 0.00 4.82
Interest Coverage Interest Coverage 0.00 -64.96
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) -37.34 -85.80
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) 23.69 7.91
Dividend Growth (1y) % Dividend Growth (1y) % 0.00 5.47
EBIAT Growth (1y) % EBIAT 1y % (Qtr) 11.04 16.85
EBITDA Growth (1y) % EBITDA 1y % (Qtr) 4.73 -0.69
EBIT Growth (1y) % EBIT 1y % (Qtr) 6.36 33.67
EBT Growth (1y) % EBT 1y % (Qtr) 6.36 1.73
EPS Growth (1y) % EPS 1y % (Qtr) 20.00 -64.54
FCF Growth (1y) % FCF 1y % (Qtr) -20.96 129.37
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 8.28 18.73
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.41 0.23
Cash Payout Ratio Cash Payout (Qtr) 0.00 0.05
Cash Ratio Cash Ratio (Qtr) 0.20 0.46
Current Ratio Curr Ratio (Qtr) 1.34 1.05
Debt to Equity Ratio Debt/Equity (Qtr) 0.56 4.88
Interest Cover Ratio Interest Cover Ratio 0.00 -64.96
Times Interest Earned Times Interest Earned 0.00 -64.96
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 21.50 -17.83
EBIT Margin % EBIT Margin % (Qtr) 18.49 125.65
EBT Margin % EBT Margin % (Qtr) 18.49 -9.92
Gross Margin % Gross Margin % (Qtr) 41.60 72.34
Net Profit Margin % Net Margin % (Qtr) 15.00 -23.76