StoneCo triggered by recent performance

StoneCo (STNE) has been on many watchlists after a recent stretch of negative short term returns, including an 18.8% decline over the past month and a 6.6% decline over the past 3 months.

Despite the recent 18.8% 1 month share price decline to US$13.35 and softer short term momentum, StoneCo still shows a 20.3% 1 year total shareholder return and a 49.3% 3 year total shareholder return.

If you are reassessing your exposure to fintech and payment names, it can be helpful to compare them with other high growth themes using our screener for 20 top founder-led companies

With StoneCo trading at US$13.35 and data suggesting a wide gap to some valuation estimates, the key question is whether recent weakness offers a genuine entry point or if the market is already pricing in future growth.

Most Popular Narrative: 34.2% Undervalued

With StoneCo last closing at $13.35 versus a narrative fair value of $20.29, the current pricing gap centers on what future earnings power could look like.

Cross-selling of end-to-end financial solutions (payments, digital banking, working capital credit) is increasing client engagement and wallet share, demonstrated by growing deposit balances (+36% year-over-year) and credit portfolio expansion (+25% sequentially). This is supporting higher recurring revenue and long-term net earnings improvement.

Want to see what kind of revenue path and profit margins sit behind that valuation gap? The narrative leans on richer earnings, rising returns, and a tighter share count to back up that $20.29 figure.

Result: Fair Value of $20.29 (UNDERVALUED)

However, this depends on Brazil risk and competition not intensifying, as slower TPV growth or higher credit losses could quickly challenge those earnings assumptions.

Next Steps

With mixed signals around valuation, growth, and risk, it helps to move quickly, stress test the assumptions, and see the full picture for yourself using 4 key rewards and 1 important warning sign

Looking for more investment ideas?

If StoneCo has sharpened your focus, do not stop here. Use the Simply Wall St screener to quickly surface fresh opportunities before others move first.

• Target consistent cash generators and see which companies combine robust fundamentals with balance sheet strength using the solid balance sheet and fundamentals stocks screener (39 results).
• Spot potential value candidates early by scanning for companies that look mispriced on quality and fundamentals through the 52 high quality undervalued stocks.
• Identify potential income ideas by reviewing companies that clear a 5%+ yield hurdle with the 13 dividend fortresses.

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.