Last Update08 Oct 25Fair value Increased 2.03%
Analysts have modestly increased their fair value estimate for PagSeguro Digital to $11.71, up from $11.48. This change reflects improved profit margin projections and updated guidance on long-term growth.
Analyst Commentary
Recent research notes on PagBank, a subsidiary of PagSeguro Digital, highlight a mix of optimism and caution among analysts as the company updates its growth strategy and long-term guidance. The following summarizes key bullish and bearish takeaways based on the latest assessments:
Bullish Takeaways- Bullish analysts have upgraded PagBank's rating to Buy and raised price targets. This reflects improved confidence in the company's valuation and capital return potential.
- Management’s ambitious strategic plan forecasts compound annual growth of over 10% in gross profit and more than 16% in earnings per share through 2029. These projections support positive long-term growth expectations.
- Excess capital distribution and ongoing efforts to enhance profitability have strengthened the investment case in the view of optimistic analysts.
- Bearish analysts maintain an Underweight view despite increased price targets. Their concerns center on limited visibility into PagBank’s underwriting standards and competitive positioning.
- The company's execution risk is considered high, particularly regarding capital deployment and achieving long-term guidance.
- Long-term estimates from bearish analysts remain below management’s targets. This signals skepticism about the achievability of the stated goals.
What's in the News
- PagSeguro Digital announces a special dividend of USD 0.1200 per share. The dividend is payable on November 3, 2025, with an ex-date and record date of October 6, 2025 (Key Developments).
Valuation Changes
- Fair Value Estimate has risen slightly, moving from $11.48 to $11.71 per share.
- Discount Rate has decreased modestly to 10.97% from 11.14%, reflecting a marginally lower risk assessment.
- Revenue Growth expectations have fallen, now at 6.66% compared to the prior 7.74% projection.
- Net Profit Margin is up slightly, increasing from 12.24% to 12.31%.
- Future P/E multiple has grown significantly, from 1.27x to 7.06x. This indicates higher anticipated earnings multiples.
Key Takeaways
- Strategic growth in credit portfolio and effective repricing bolster income and profit amid Brazil's interest rate environment.
- Client engagement and buybacks enhance PagBank revenue and shareholder value through monetization and EPS growth.
- The company faces challenges from higher interest rates, competition from alternatives like PIX, and strategic risks from share buybacks impacting long-term growth and profitability.
Catalysts
About PagSeguro Digital- Engages in the provision of financial and payment solutions for consumers, individual entrepreneurs, micro-merchants, and small and medium-sized companies in Brazil and internationally.
- PagSeguro's credit portfolio grew by 36% year-over-year, focusing on secured loans and a sustainable strategy, which should enhance net income growth through increased interest income from low-risk lending.
- Strong repricing strategies in response to the hiking interest rates in Brazil are expected to partly mitigate the impact on financial costs, contributing positively to gross profit and overall earnings.
- The expansion in client engagement and monetization across PagBank's banking and payment ecosystems is increasing revenue opportunities, which is expected to support revenue and profit growth.
- Lower cost of funding due to reduced average yield on deposits is anticipated to enhance net margins by improving financial cost efficiency.
- Execution of a significant buyback program is set to enhance EPS growth through reduced share count, thereby creating shareholder value.
PagSeguro Digital Future Earnings and Revenue Growth
Assumptions
How have these above catalysts been quantified?- Analysts are assuming PagSeguro Digital's revenue will grow by 8.1% annually over the next 3 years.
- Analysts assume that profit margins will increase from 11.4% today to 11.5% in 3 years time.
- Analysts expect earnings to reach R$2.8 billion (and earnings per share of R$8.82) by about September 2028, up from R$2.2 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as R$2.0 billion.
- In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 7.2x on those 2028 earnings, up from 6.6x today. This future PE is lower than the current PE for the US Diversified Financial industry at 16.4x.
- Analysts expect the number of shares outstanding to decline by 6.45% per year for the next 3 years.
- To value all of this in today's terms, we will use a discount rate of 11.2%, as per the Simply Wall St company report.
PagSeguro Digital Future Earnings Per Share Growth
Risks
What could happen that would invalidate this narrative?- The company faces challenges from a higher SELIC rate than initially projected, which could impact the cost of funding and financial costs, potentially affecting overall net margins and profitability.
- There is a shift in the client and product mix and increasing competition from products like PIX that can lower transaction yields and affect potential revenue from transaction fees.
- The reliance on repricing strategies to mitigate higher interest rates could lead to client churn, especially if competitors do not follow suit, impacting the company's revenue growth and net income.
- While the company has significant exposure to secured loans, any delay in developing government-backed opportunities like the private payroll could hinder expected growth in the banking sector, impacting net revenue and earnings.
- The company is executing a substantial share buyback program, which, while enhancing EPS, may limit available capital for other strategic growth initiatives, potentially affecting long-term revenue and profit growth.
Valuation
How have all the factors above been brought together to estimate a fair value?- The analysts have a consensus price target of $11.228 for PagSeguro Digital based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $13.98, and the most bearish reporting a price target of just $5.17.
- In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be R$24.4 billion, earnings will come to R$2.8 billion, and it would be trading on a PE ratio of 7.2x, assuming you use a discount rate of 11.2%.
- Given the current share price of $9.1, the analyst price target of $11.23 is 19.0% higher.
- We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.
How well do narratives help inform your perspective?
Disclaimer
AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.
