PagSeguro Digital Ltd. shares traded at $10.43 on January 12th, according to market data. The stock's trailing price-to-earnings ratio was 7.69, with a forward P/E of 6.98.
The Brazilian fintech company, founded in 2006 and publicly listed in 2018, offers payment processing services for merchants alongside digital banking solutions. From 2018 to 2024, net income grew at a compound annual rate of 15%, while revenue increased 27% annually over the same period.
Despite this historical growth, the stock trades near book value with a P/E ratio around 7. The company's profitability shows significant sensitivity to Brazilian interest rates, currently at 15%, because its prepayment service requires funding to advance payments to merchants.
A 1% decrease in interest rates could boost annual pre-tax profits by approximately $60 million, creating potential upside from anticipated rate cuts in early 2026. PagSeguro maintains a cash position of about $1.8 billion after accounting for funding liabilities.
The company reports a Basel Ratio of 30% and return on average equity between 14% and 15%. Management has been returning capital through share buybacks and dividend payments, with total expected capital return yield reaching 16% in 2026.
For 2025, management guidance projects net income growth between 11% and 15%. Longer-term expectations include earnings per share compound annual growth exceeding 16% through 2029, alongside gross profit growth above 10% annually.
Risks include competition from traditional banks and other fintech companies, along with growing adoption of Brazil's instant payment system PIX, which could reduce fee income and demand for prepayment services. Payment processing market share has seen slight decline due to fee repricing.
The company benefits from its broad service ecosystem and backing from UOL, which controls 85% of voting power. Twenty-seven hedge fund portfolios held PagSeguro Digital Ltd. shares at the end of the second quarter, down from twenty-nine in the previous quarter.