In the midst of a crowded and competitive industry, PayPalit’s (PYPL 5.89% ) balance sheet captures the attention of investors. In this clip from “The Virtual Opportunities Show” on Motley Fool live, recorded on March 15Motley Fool contributor Jose Najarro explains why investors should keep an eye on fintech stocks.
Jose Najarro: PayPal, right now, is down 60% from all-time highs. I think it’s crazy the way the market is right now. But, we can see it’s big. Another thing, I’m not a big fan of metrics, but I just like to see how things go. It’s not, ultimately, much of my investment thesis, but we can see that PayPal’s price-to-sales ratio is 4.6. These are values seen in 2016, 2017. This is a company that owns Venmo and other digital wallets, so it has grown its overall user base. Some other things I wanted to show, after 12 months the company’s gross profit continues to see a nice upward trend here. Then, I wanted to show their fundamentally fair balance sheet. They have a lot of money on their balance sheet. They have good debt, but over 12 months they have about $6.4 billion in cash flow from operations. At the moment, just obviously looking at the high end, things don’t look too bad for PayPal. I know PayPal revamped their app recently to create the new PayPal app, which is pretty cool to have things like buy now, pay later. It’s not something I’m a fan of, but I know we’re seeing a nice growth in the number of users using apps like this. They also provided a few more crypto solutions. For example, if you buy crypto with PayPal, you can pay through it. It’s pretty much just a matter of changing your crypto to your current fiat and then making the transaction there. Another thing I wanted to mention is that even though the growth is not as big as 2020, and obviously 2020 is going to be a very tough competition, we can see this last year of 2021. They just finished their fiscal . They increased new active accounts to over 48.9 million. Most of this growth was actually organic. The other thing that I found super interesting is that the total volume of payments continues to grow. Again, we are still seeing improvements in operating cash flow and free cash flow. This company has been somewhat affected by eBay (EBAY 0.63% ). If you look at just the top stills, the growth in numbers doesn’t seem as strong, but if you exclude eBay, this is a company that I believe continues to show strong market fundamentals. I want to say that at the end of the day, there are many other fintech solutions. The overall increase in other competitors can also harm this business. But, for me, it’s definitely something to watch, especially with the growth we’re seeing right now.
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