Paypal($PayPal(PYPL)$ ) has been one of the most searched-for stocks lately. So, you might want to look at some of the facts that could shape the stock's performance in the near term.
Over the past month, shares of this technology platform and digital payments company have returned -9.5%, compared to the S&P 500 composite's -10% change. During this period, the Internet - Software industry, which Paypal falls in, has lost 13.1%.
The key question now is: What could be the stock's future direction?
While media releases or rumors about a substantial change in a company's business prospects usually make its stock 'trending' and lead to an immediate price change, there are always some fundamental facts that eventually dominate the buy-and-hold decision-making.
Earnings Estimate Revisions
Rather than focusing on anything else, we prioritize evaluating the change in a company's earnings projection. This is because we believe the fair value for its stock is determined by the present value of its future stream of earnings.
For the current quarter, Paypal is expected to post earnings of $0.87 per share, indicating a change of -24.4% from the year-ago quarter. The Consensus Estimate has changed -0.3% over the last 30 days.
For the current fiscal year, the consensus earnings estimate of $3.95 points to a change of -14.1% from the prior year. Over the last 30 days, this estimate has changed -2.1%.
For the next fiscal year, the consensus earnings estimate of $4.77 indicates a change of +20.9% from what Paypal is expected to report a year ago. Over the past month, the estimate has changed +124.2%.
The chart below shows the evolution of the company's forward 12-month consensus EPS estimate:
12 Month EPS
12-month consensus EPS estimate for PYPL
Revenue Growth Forecast
While earnings growth is arguably the most superior indicator of a company's financial health, nothing happens as such if a business isn't able to grow its revenues. After all, it's nearly impossible for a company to increase its earnings for an extended period without increasing its revenues. So, it's important to know a company's potential revenue growth.
In the case of Paypal, the consensus sales estimate of $6.82 billion for the current quarter points to a year-over-year change of +9.3%. The $28.26 billion and $32.84 billion estimates for the current and next fiscal years indicate changes of +11.4% and +16.2%, respectively.
Last Reported Results and Surprise History
Paypal reported revenues of $6.48 billion in the last reported quarter, representing a year-over-year change of +7.5%. EPS of $0.88 for the same period compares with $1.22 a year ago.
Compared to the Consensus Estimate of $6.41 billion, the reported revenues represent a surprise of +1.17%. The EPS surprise was 0%.
Over the last four quarters, Paypal surpassed consensus EPS estimates two times. The company topped consensus revenue estimates two times over this period.
Valuation
No investment decision can be efficient without considering a stock's valuation. Whether a stock's current price rightly reflects the intrinsic value of the underlying business and the company's growth prospects is an essential determinant of its future price performance.
While comparing the current values of a company's valuation multiples, such as price-to-earnings (P/E), price-to-sales (P/S) and price-to-cash flow (P/CF), with its own historical values helps determine whether its stock is fairly valued, overvalued, or undervalued, comparing the company relative to its peers on these parameters gives a good sense of the reasonability of the stock's price.
Paypal is graded D on this front, indicating that it is trading at a premium to its peers.
Resource: Finance Yahoo
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