Shares of Cayman Islands-based fintech stock StoneCo (NASDAQ: STNE) enjoyed a 13.2% run-up through 11:30 a.m. ET Monday morning, as investors got their first chance to react to the company’s apparent after-hours earnings beat on Friday.
StoneCo closed out its third quarter of 2023 with 3.1 billion reals in revenue and 545 million reals in adjusted pre-tax earnings, “exceeding expectations,” as management declared.
Reals are the Brazilian currency, in which StoneCo reports its results — seeing as it’s a Brazilian company, despite being headquartered in the Caymans. There are 4.92 Brazilian reals to the US dollar.
When I say that StoneCo did 3.1 billion reals in revenue, you can think of this as $609.9 million — a number that almost precisely matches analyst forecasts for $610.2 million in Q3 revenue. Even better, StoneCo’s adjusted pre-tax profit of 545 million reals works out to about $110.9 million total, or about $0.35 per share. This appears to be much better than the $0.22 profit that Wall Street analysts had forecast.
To put those numbers in even more context, StoneCo noted that its sales grew 25% year over year in local currency terms — and its pre-tax earnings grew 228%.
With Q3’s numbers in the bag, StoneCo now has a trailing net profit of $206 million and is on course to book its first full-year profit after two straight years of losses. StoneCo also boasts positive free cash flow of $351 million in cash profits booked over the last 12 months.
All of this, mind you, is on a fintech stock with only a $3.4 billion market capitalization, with $1.1 billion in net cash on its balance sheet, and therefore with an enterprise value of just $2.3 billion — and an enterprise-value-to-free-cash-flow valuation of just 6.6. For a company that just showed it can grow its revenue base at 25% annually, this seems like an incredibly cheap valuation for StoneCo.
I’d say investors buying the stock today are making the right call.
10 stocks we like better than StoneCo
When our analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
They just revealed what they believe are the ten best stocks for investors to buy right now… and StoneCo wasn’t one of them! That’s right — they think these 10 stocks are even better buys.
*Stock Advisor returns as of November 6, 2023
Blog powered by G6
Disclaimer! A guest author has made this post. G6 has not checked the post. its content and attachments and under no circumstances will G6 be held responsible or liable in any way for any claims, damages, losses, expenses, costs or liabilities whatsoever (including, without limitation, any direct or indirect damages for loss of profits, business interruption or loss of information) resulting or arising directly or indirectly from your use of or inability to use this website or any websites linked to it, or from your reliance on the information and material on this website, even if the G6 has been advised of the possibility of such damages in advance.
For any inquiries, please contact [email protected]