PayPal stock: Not as cheap as it looks!

that PayPal-The stock (WKN: A14R7U) is cheap? Yes, possibly. We can look at many different factors to determine this. In addition, the share price is around 67% below the record high. And above all, that the stock comes with favorable ratios.

For example, the 2021 price-to-earnings ratio for PayPal stocks is not even 26. This may be a very moderate valuation target for foolish investors who believe in the long-term growth outlook. In any case, there is quality and a strong ecosystem in the growth market for digital payment services.

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Recently, I read a statement that said this stock is not as cheap as it looks. Shocking distress! Here is the takedown for those who jumped up recently and may be a little worried right now.

PayPal shares: Not so cheap anyway …?!

The analysis has been published on a US portal that Simply Wall Street names. To predict this first: There is a core of truth that we cannot deny. PayPal shares may not be as cheap as they appear in the short term. However, we know this when we look at the forecast.

As said author to Simply Wall Street goes on to say that PayPal shares are likely to see declining profits in fiscal year 2022. Management expects earnings per. share will be between $ 2.19 and $ 2.34 on a GAAP basis. Judging from these figures, we can get a very clear sense of where the fundamental valuation is heading: more in the direction of a price / earnings ratio of 38.8 to 41.4 at current stock prices. Is it cheap in the short term or not? You can certainly argue about that.

In any case, PayPal shares are not as cheap or cheap as they seem. Nevertheless, the author also goes on to say that growth and the ecosystem are intact. This is illustrated by a sales growth of between 11% and 13% on a currency-adjusted basis. In addition, management expects to be able to gain 10 million new net customers in the current financial year. There is therefore still qualitative and quantitative growth.

She wants to be so cheap

To me, the PayPal stock with its current set of indicators is proof once again that you can not blindly rely on just the analysis of profits, cash flows or results. In 2022, there will be a decline in earnings per share, no doubt. But seriously: it does not change the fundamental long-term valuation. Continued growth means that key figures such as price / earnings ratios or even price / sales ratios may still increase in the longer term.

For me, earnings per. stock between $ 2.19 and $ 2.34 just that fiscal year 2022 is changing. A transition year, if you will. Nevertheless, the ecosystem, together with the megatrend market, means that there is a solid long-term perspective that increases sales and profits.

PayPal shares may be visually more expensive on a price-to-earnings basis after fiscal year 2022. However, it is not a game changer for me, and therefore I no longer bet on this exciting growth stock with a solid, long-term risk-reward ratio.

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Vincent owns shares in PayPal. The Motley Fool owns shares in and recommends PayPal.

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