DLocal (DLO) is back in focus after UATP selected the company as a payment processing partner for its UATP One platform. The move links DLocal to airlines and travel merchants across fast growing emerging markets.

DLocal’s recent earnings report and the UATP partnership appear to be feeding into strong momentum, with a 1 day share price return of 5.79% and a 90 day share price return of 29.33%. At the same time, the 1 year total shareholder return of 5.32% contrasts with a 3 year total shareholder return that declined 19.91% and a 5 year total shareholder return that declined 74.06%. This highlights how recent enthusiasm sits against a weaker longer term record.

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After this sharp move and a wide gap between DLocal’s US$15.17 share price and both analyst targets and intrinsic estimates, the real question is where fair value clusters for this stock next.

Most Popular Narrative: 70.2% Undervalued

According to the most followed valuation narrative on DLocal, a fair value of $50.96 sits far above the last close at $15.17. That gap is drawing attention to how aggressively the narrative prices in long term cash generation.

DLocal trades below the value implied by discounting its own free cash flow. On a two-stage model running 10 years of +25.0% growth fading to a 2.5% terminal rate, discounted at 9.8%, the shares are worth USD 50.96 against a market price of USD 15.24, a 70% discount, or +234% to fair value. 58% of that value sits in the terminal period, which is the honest caveat, the further out the cash flow, the more the answer is a statement about assumptions rather than about this year.

Want to see how this narrative gets from today’s $15 range to a fair value above $50? The key is an aggressive earnings glide path, high reinvestment returns and a long runway of cash compounding built into the model. The exact mix of growth, margins and discounting might surprise you.

Result: Fair Value of $50.96 (UNDERVALUED)

However, DLocal’s reliance on fast growing emerging markets and a weaker multi year shareholder return record could quickly put pressure on this bullish, cash flow driven narrative.

Another View on DLocal’s Valuation

The user narrative leans heavily on discounted cash flows and concludes DLocal is deeply undervalued. The preferred earnings multiple sends a cooler message. DLocal trades on a P/E of 21.8x, above the US Diversified Financial industry at 17.9x and above its own 18.2x fair ratio, which implies some valuation risk if sentiment shifts.

The same 21.8x P/E is below the 46.7x peer average, so DLocal may still look relatively reasonable inside its immediate group. The key question is whether earnings keep justifying a premium to the industry as a whole or move closer to that lower fair ratio level.

Next Steps

With the market clearly divided on DLocal, this is a good time to look through the numbers yourself and decide how compelling the reward profile really is. To see what investors are optimistic about, take a closer look at the 4 key rewards

Looking for more investment ideas beyond DLocal?

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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.