StoneCo

Classic Buy&Hold share -> Stocked up 👋🏻

Stock analysis StoneCo
$STNE (-0,09%)

StoneCo Ltd. is a provider of financial services (84%) and software (15%). StoneCo is active in an exciting emerging market: Brazil.

But first, the key figures:

Price: $13.25 (YTD +40%) (-85% from ATH) (-58% IPO 2018).

KUV: 2

P/E RATIO: 4730

forward P/E ratio: ~18

Revenue growth yoy: +31% (Q1 2023)

5y avg. Revenue growth: +74.44%

EBIT growth yoy: 240.56%

5y avg. EBIT growth: 40.90%

I became aware of the company mainly due to the catastrophic development of the share price, which resulted in a (supposedly) favorable valuation of a fast growing company.

What happened?

In May 2021, StoneCO acquired a stake in Banco Inter for the equivalent of $471 million dollars. At the time, StoneCo had a valuation of approximately $20 billion (~$4.15 billion today). However, this stake rapidly depreciated, resulting in a -90% loss (StoneCo fully liquidated its stake in Banco in February 2023). Accordingly, the losses had a negative impact on the results of the last quarters and triggered a crash in the share price. StoneCo had not only bought a completely overpriced stake, but at the same time had borrowed in a foreign currency (dollars) with rising interest rates. The falling exchange rate of the Brazilian real to the U.S. dollar also played an important role here. To finance the deal, some new shares had to be issued (see picture no. 1).

Why should the company or the share be interesting at all?

The management was gradually replaced after the gross blunder. A new CFO and a new CEO were hired. With Pedro Zinner, the company is now headed by an experienced CEO who had already achieved a successful turnaround at Envea.Although the Banco deal eroded StoneCo's fundamentals, the operating business continued to perform very well. StoneCo continues to record strong growth and is even gaining market share (see picture no.2). Profits are being written again and a large cash position is being built. The negative one-off effects that affected the results are now a thing of the past and nothing seems to stand in the way of strongly increasing profits. Measured against the growth rates, a forward P/E ratio of 18 is very favorable, even if growth is slowing down somewhat. Debt is now covered by assets again and the company is in a much better position than 2 years ago.Macro environment: The Brazilian Central Bank currently has an interest rate of 13.75% after strong interest rate hikes. Currently, inflation there is around 4%, close to the central bank's target of 3.25%. So a rate cut in the near future is definitely in the realm of possibility - which could provide further upside for the stock price.

Conclusion:

In my opinion, with StoneCo you get a fast-growing, yet profitable company in a fast-growing sector of an exciting emerging market. The downside is limited due to the crashed share price, currently the company is undervalued (by my personal valuation standards), but it also needs to win back investor confidence first. Nevertheless we are dealing here with a ailing company in a difficult market environmentwhich is also exposed to political risks in Brazil. So please inform yourself again intensively before you click here on buy :D

No investment advice and information to the best of my knowledge based on the sources.

Sources:

https://investors.stone.co/news-releases/news-release-details/completion-ceo-transition

https://investors.stone.co/static-files/c62e910c-9608-425f-9ff7-c56c335f0087

https://www.nasdaq.com/articles/stoneco-signs-%24471m-investment-agreement-with-banco-inter-2021-05-25

Also: MSN Finance, Yahoo Finance, MarketScreener

getquin Daily Summary 23.11.2022

Hello getquin,

Happy Wednesday to all of you. How did the week go for you? Are your portfolios in the green?

Europe🌍:

• Credit Suisse shareholders give green light to $4.2 billion capital increase. Read more: https://cnb.cx/3AE7QHS

• Credit Suisse to lay off one-third of investment bankers working in China. Read more: https://reut.rs/3AD3FvG

• German authorities search BNY Mellon bank as part of cum-ex investigation. Read more: https://reut.rs/3VoWizV

• 33 percent for oil and gas companies: that's Lindner's plan for an excess profits tax. Read more: https://bit.ly/3AGQmue

• Uniper needs up to 33 billion euros in capital from the state. Read more: https://bit.ly/3U3hdrt

• Manchester United parts ways with Ronaldo. Read more: https://bit.ly/3ETrNwO

America🌏:

• White House extends student loan repayment break until June 2023. Read more: https://bit.ly/3V5e5fW

• US Congress holds hearing on Ticketmaster issues after Taylor Swift debacle. Read more: https://reut.rs/3XsQZ4j

• Pipe's founding team steps down and search begins for 'experienced' CEO. More: https://tcrn.ch/3i9uHEQ

• Recession fears drive media industry layoffs. Read more: https://bit.ly/3U70kMh

Asia🌏:

• China leads global IPO volume this year. Read more: https://reut.rs/3OuX3oS

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Time: 17:00 CEST

#MarketNews
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getquin Daily Summary 19.08.2022

Hello getquin,

BVB wants to make profits as well as goals with fiscal year 2023/2024. Also, John Culver is leaving Starbucks after two years. Revolution Beauty suspends stock trading and today's quarterly number is John Deere!

Europe🌍:

1. Borussia Dortmund aims to return to profit in fiscal year 2023/2024

After the second full season of the pandemic, Borussia Dortmund reports a loss of 35 million euros. The minus from the previous year was still 72 million euros. The club published these preliminary figures for the 2021-2022 fiscal year.

One factor was that the Bundesliga soccer club was able to offer only 40 percent of tickets through Corona, on the one hand, due to its early elimination from the Champions League and, on the other hand, received less money from TV advertising. Instead of just under 187 million euros, BVB took in 145 million here. Revenue from match operations rose from almost zero to 22.6 million euros. Due to the pandemic in the previous season, no spectators were allowed in the Bundesliga.

Don't just invest in soccer tickets? https://bit.ly/3Axjtk4

🟥 $BVB (-0,16%) (🔽 -0,72%)

America🌏:

2nd Starbucks chief to leave the company

Starbucks Chief Operating Officer John Culver is leaving the company after two decades with the coffee chain as part of a restructuring that will eliminate his role.

His departure comes at a time of major executive restructuring at Starbucks. Former CEO Kevin Johnson retired earlier this year, prompting Howard Schultz to return to the top job as interim chief executive until a long-term successor is named.

Read more here: https://cnb.cx/3QWS0Ok

🟥 $SBUX (+0,02%) (🔽 -1,04%)

Asia🌏:

3rd Revolution Beauty suspends stock trading due to accounting concerns

Revolution Beauty Group said Friday that trading in its shares will be suspended from Sept. 1 as the beauty products maker does not expect to report its 2022 results by Aug. 31 after auditors found accounting issues.

Click here for Insights: https://reut.rs/3c1pHzu

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Quarterly figures:

🚜 John Deere
$DE (-0,03%)

Deere & Co on Friday revised its full-year profit forecast after missing Wall Street's earnings expectations as the world's largest farm equipment maker struggled with parts and semiconductor shortages due to supply chain constraints.

EPS: 🟥 $6.68 expected vs $6.16 published; Difference: -7.74%

Revenue: 🟩 $12.84 billion expected vs $13.00 billion published; variance: 1.23%.

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🟥 bitcoin ₿, €21,314.70 (🔽 -7.26%)

Time: 16:45 CEST

Fun Fact:

Did you know that U.S. companies are reportedly hiding $1.6 trillion in profits overseas?

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