What DLocal’s Russell index additions mean for investors

DLocal (NasdaqGS:DLO) has been added to multiple Russell indexes, including the Russell 2000 and Russell 3000 families, following the latest reconstitution. For investors, index inclusion often reshapes trading activity and institutional attention.

The company’s new membership in benchmarks such as the Russell 2000 Defensive Index, Russell 2500 Index and several Russell growth and completeness indexes ties DLocal more closely to small cap and growth focused portfolios. Funds that track or reference these benchmarks typically adjust positions around reconstitution. This can affect liquidity and order flow in the stock.

This development arrives with DLocal’s stock recently closing at US$12.87 and a market value of about US$3.7b. Over the past year, the stock has gained 15.38%, while the year to date return is down 8.56%, giving investors a mixed performance picture heading into this index change.

DLocal’s recent addition to the Russell indexes comes as the stock posts a 5.36% 7 day share price return and an 8.47% 30 day share price return. The 1 year total shareholder return of 15.38% contrasts with a 5 year total shareholder return that is down 74.13%, pointing to improving short term momentum after a much weaker long term experience for many holders.

If this index inclusion has you thinking more broadly about financials and payment platforms, it could be a useful moment to scan the market for other growth focused opportunities such as the 20 top founder-led companies

With DLocal trading at US$12.87, showing double digit annual revenue and net income growth, and sitting at a sizeable discount to analyst and intrinsic estimates, the key question is whether this signals undervaluation or indicates that the market is already pricing in future growth.

Most Popular Narrative: 25.9% Undervalued

The most followed DLocal narrative pegs fair value at $17.35, well above the recent $12.87 close, framing the stock as meaningfully discounted in that view.

dLocal's rapid expansion of its solution set (SmartPix for Pix, Buy Now Pay Later partnerships, stablecoin payment infrastructure) and continued onboarding of new alternative payment methods position it to benefit from accelerating digitization of payments in emerging markets, supporting sustained top-line growth and potential for higher take rates on new products, which is described as positive for revenue and gross margin.

Want to understand why this narrative supports such a gap to the current price? It hinges on compounding revenue, rising margins, and a future earnings multiple that assumes meaningful scaling. The full narrative joins these moving parts into one valuation story.

Putting it together, the most widely followed narrative assumes future earnings growth, higher profit margins and an 8.72% discount rate to conclude DLocal is trading below its modeled worth. Result: Fair Value of $17.35 (UNDERVALUED)

However, this DLocal narrative also leans on assumptions that could be challenged if heavy reliance on top global merchants persists or if regulatory and currency pressures in key emerging markets intensify.

Another View on DLocal’s Valuation

While the leading DLocal narrative leans on future cash flows and a modeled fair value of $17.35, the current P/E of 19.6x paints a different picture. It sits above both the US Diversified Financial industry at 15.4x and the fair ratio of 18.4x, which points to less room for error. The question for investors is whether the bigger risk is that expectations are too high rather than too low.

Next Steps

If this mix of optimism and caution around DLocal has you thinking, it makes sense to review the numbers yourself and act while sentiment is fresh. To see what those positives look like in detail, start with the 4 key rewards.

Looking for more DLocal investment ideas?

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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.