Why StoneCo Stock Is Back on Investor Radar Ahead of Earnings

Recent commentary around expected earnings growth and relatively low valuation has pushed StoneCo (STNE) back into focus as the company approaches its next quarterly report with heightened investor attention.

StoneCo's share price has risen 6.28% over the past month but is still down 23.38% year to date. A 1-year total shareholder return decline of 2.82% and a 5-year total shareholder return decline of 75.44% show how recent optimism around expected earnings growth and comparatively low P/E and PEG ratios is emerging after a long period of weaker overall returns.

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StoneCo trades at a steep discount to both analyst price targets and some estimates of intrinsic value after its recent bounce. Is this simply the market staying cautious for good reason, or mispricing the stock?

Most Popular StoneCo Narrative: 24% Overvalued

The most followed valuation narrative currently pegs StoneCo's fair value at $9.10, below the last close of $11.26. This frames the upcoming earnings debate around whether expectations still look too optimistic.

The company's high reliance on Brazil's SMB segment exposes it to outsized credit risk and extreme earnings volatility during economic downturns or periods of tighter credit conditions, especially as higher global interest rates and sluggish consumer spending in emerging markets are likely to depress payment volumes and strain transaction-based revenue growth. Mounting competition from both local fintechs and established global payments giants is anticipated to drive aggressive pricing pressure across the sector, threatening StoneCo's revenue growth, eroding operating leverage, and compressing net income as sustained technological investment becomes a requirement just to maintain its current market position.

Want to understand why this fair value sits below the current price? The narrative leans on slower revenue gains, thinner margins, and a very different earnings profile a few years out. The specific growth path and profit assumptions behind that view might surprise you.

Result: Fair Value of $9.10 (OVERVALUED)

However, if StoneCo keeps expanding its MSMB client base and successfully cross sells banking and credit products, that could challenge the bearish earnings and valuation narrative.

Another View on StoneCo Valuation

While the most popular StoneCo narrative points to a fair value of $9.10 and calls the stock overvalued, the current P/E of 3.8x tells a different story. It sits well below peers at 13.9x and an estimated fair ratio of 11.9x, which suggests the market could be pricing in a lot of risk already. Which lens do you find more convincing?

For a closer look at how this earnings multiple compares across peers and how the fair ratio might shift as new results come through, See what the numbers say about this price — find out in our valuation breakdown.

Next Steps

With mixed opinions around StoneCo's valuation and outlook, this is a moment to move quickly, review the full data, and decide where you stand by weighing the 3 key rewards and 2 important warning signs

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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.