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How to Play PagSeguro (PAGS) Ahead of Its Q1 Earnings Results?

PagSeguro Digital PAGS will report its first-quarter 2024 results on May 23, after market close.

Let’s check out how PAGS has lately been doing.

Stock Performance & Valuation

The stock has gained 39.9% over the past six months, outperforming the 11.3% rally of the industry it belongs to and the 17.1% rise of the Zacks S&P 500 composite.

On the basis of the Price/Earnings ratio, PAGS is trading at 9.5X forward earnings compared with the industry’s 22.56X. If we look at the Price/Sales ratio, PAGS shares currently trade at 1.29X, below the industry’s 7.02X. Based on the Price/Book ratio, the company stock currently trades at 1.59X compared with the industry’s 7.54X.

PagSeguro Digital Ltd. Price and EPS Surprise

 

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PagSeguro Digital Ltd. price-eps-surprise | PagSeguro Digital Ltd. Quote

2023 Sales & Margin Performance

PAGS’s 2023 revenues increased 4% year over year. The rise was facilitated majorly by the Payments segment. The increase in Total Payment Volume (TPV) and Transaction Cost savings due to the interchange cap positively impacted the performance of the segment.

Gross profit grew 9.4% on a year-over-year basis. Growth in PIX QR Code due to better unit economics with instant settlement and lower costs in comparison with cards and a rise in Total Deposits due to accessibility to cheaper funding sources that enabled pricing power and better margins resulted in this rise.

The gross profit margin of 37.4% rose 180 basis points (bps) from the preceding year. Adjusted EBITDA grew 14.8% year over year. The adjusted EBITDA margin increased 210 bps to 22% from the preceding year.

Liquidity

PAGS’s current ratio (a measure of liquidity) was at 1.42 at the end of fourth-quarter 2023, higher than the year-ago quarter’s 1.34. A current ratio of more than 1 often indicates that a company will easily pay off its short-term obligations.

Sales & EPS Growth Prospects

For first-quarter 2024, the Zacks Consensus Estimate for revenues is pegged at $679.16 million, suggesting a 5.9% dip on a year-over-year basis. The consensus estimate for earnings is pegged at 30 cents per share, indicating a rise of 30.4% from the year-ago quarter’s actual.

For 2024, the Zacks Consensus Estimate for PAGS’s revenues is pegged at $3.14 billion, suggesting a 1.7% year-over-year decline. The consensus estimate for earnings is pinned at $1.29 per share, implying a year-over-year increase of 18.4%.

To Conclude

PAGS trades at a discount relative to its industry based on its Price/Earnings, Price-to-Sales and Price-to-Book ratios. The company’s liquidity position has been healthy.

However, since the stock has gained 39.9% over the past six months, it may undergo a correction soon.

Moreover, PAGS does not seem poised for an earnings beat. Per our quantitative model, the combination of two key elements — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — increases the odds of a positive earnings surprise. But that is not the case with PAGS, as it has an Earnings ESP of 0.00% and a Zacks Rank #3 at present.

Given this backdrop, it may not be a bad idea to wait for this fundamentally strong stock to undergo some correction and offer a better entry point rather than rushing to purchase the stock before earnings.

Stocks to Consider

Here are a few stocks from the broader  Business Services sector, which, according to our model, have the right combination of elements to beat on earnings this season.

GDS Holdings GDS: The Zacks Consensus Estimate for the company’s first-quarter 2024 revenues is pegged at $369.51 million, indicating 5.3% growth from the year-ago quarter’s actual. The consensus mark for loss is pegged at 32 cents per share, whereas it reported a loss of 40 cents in the year-ago quarter. The company has an average negative surprise of 14.4%.

GDS currently has an Earnings ESP of +14.74% and a Zacks Rank of 3. The company is scheduled to declare its first-quarter results on May 22. You can see the complete list of today’s Zacks #1 Rank stocks here.

FactSet Research Systems FDS: The Zacks Consensus Estimate for the company’s first-quarter 2024 revenues is pegged at $554.4 million, indicating growth of 4.6% from the year-ago quarter’s actual. The consensus mark for earnings is pegged at $3.92 per share, suggesting a rise of 3.4% on a year-over-year basis. The company has an average negative surprise of 0.2%.

FDS currently has an Earnings ESP of +0.59% and a Zacks Rank of 3. The company is scheduled to post its first-quarter results on Jun 27.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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FactSet Research Systems Inc. (FDS) : Free Stock Analysis Report

GDS Holdings (GDS) : Free Stock Analysis Report

PagSeguro Digital Ltd. (PAGS) : Free Stock Analysis Report

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