Amid a crowded and competitive industry, PayPal‘s (NASDAQ: PYPL) balance sheet is holding the attention of investors. In this clip from “The Virtual Opportunities Show” on Motley Fool Live, recorded on March 15, Motley Fool contributor Jose Najarro discusses the reasons why investors should keep an eye on the fintech stock.
Jose Najarro: PayPal, right now, is down 60% from all-time highs. I think this is insane how the market is right now. But, we can see it’s down big. Another thing, I’m not huge into metrics, but I just like to see how things are. It’s not, at the end of the day, a huge part in my investment thesis, but we can see PayPal’s price-to-sales ratio is at 4.6. These are values seen in 2016, 2017. This is a company that has Venmo and other digital wallets, so they have increased their overall user base. Some other things I wanted to show, trailing 12 months, company’s gross profits continue to see a nice uptrend here. Next, I wanted to show their fundamentally right balance sheet. They have plenty of cash in their balance sheet. They do have a nice amount of debt, but trailing 12 months, they have about $6.4 billion in cash flow from operations. At the moment, just from looking obviously at the top end, things don’t look too bad for PayPal. I know PayPal recently has revamped their application to create the new PayPal app, which is pretty cool to have things like buy now, pay later. Not something I’m a fan of, but I know we’re seeing a nice amount of user growth using applications like that. They’ve also provided a little bit more crypto solutions. For example, if you buy crypto with PayPal, you can pay through it. It’s pretty much just changing your crypto to your current fiat and then making the transaction there. Another few things I wanted to mention is, even though growth is not as big as it was in 2020, and obviously 2020 is going to be a very hard comp, we can see this most recent year of 2021. They just finished their fiscal year. They grew new active accounts by over 48.9 million. Most of that was actually organic growth. The other thing that I thought was super interesting was that total payment volume continuing to grow. Again, we’re still seeing improvements in operating cash flow and free cash flow. This company has been impacted somewhat from eBay (NASDAQ: EBAY). If you’re just looking at top value stills, number growth don’t seem as strong, but if you exclude eBay, this is a company that’s continuing, in my opinion, to show strong market fundamentals. I want to say, at the end of the day, there are numerous other fintech solutions. The overall increase of other competition can also be hurting this company. But, to me, this is definitely one to keep an eye on, especially with the growth that we’re seeing right now.
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Jose Najarro owns PayPal Holdings. The Motley Fool owns and recommends PayPal Holdings. The Motley Fool recommends eBay and recommends the following options: short April 2022 $62.50 calls on eBay. The Motley Fool has a disclosure policy.
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