Yahoo Finance Earnings are growing at PagSeguro Digital (NYSE:PAGS) but shareholders still don't like its prospects
As an investor, mistakes are inevitable. But really bad investments should be rare. So spare a thought for the long term shareholders of PagSeguro Digital Ltd. (NYSE:PAGS); the share price is down a whopping 74% in the last three years. That might cause some serious doubts about the merits of the initial decision to buy the stock, to put it mildly. And more recent buyers are having a tough time too, with a drop of 67% in the last year. Furthermore, it's down 44% in about a quarter. That's not much fun for holders. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.
Since PagSeguro Digital has shed US$258m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.
Check out our latest analysis for PagSeguro Digital
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
During the unfortunate three years of share price decline, PagSeguro Digital actually saw its earnings per share (EPS) improve by 2.8% per year. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Or else the company was over-hyped in the past, and so its growth has disappointed.
After considering the numbers, we'd posit that the the market had higher expectations of EPS growth, three years back. But it's possible a look at other metrics will be enlightening.
Revenue is actually up 36% over the three years, so the share price drop doesn't seem to hinge on revenue, either. It's probably worth investigating PagSeguro Digital further; while we may be missing something on this analysis, there might also be an opportunity.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
PagSeguro Digital is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. If you are thinking of buying or selling PagSeguro Digital stock, you should check out this free report showing analyst consensus estimates for future profits.
A Different Perspective
The last twelve months weren't great for PagSeguro Digital shares, which performed worse than the market, costing holders 67%. The market shed around 17%, no doubt weighing on the stock price. The three-year loss of 20% per year isn't as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. Before forming an opinion on PagSeguro Digital you might want to consider these 3 valuation metrics.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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