At just 7.6 times earnings, PayPal (NASDAQ: PYPL) is essentially priced like a mature utility stock. This may seem odd for a company that is generating $6 billion or more in annual free cash flow, has a loyal customer base of nearly 440 million active accounts, and is buying back stock hand over fist.
To be fair, although PayPal is a very cheap stock by most metrics, there's also significant uncertainty about the company's future. In this article, we'll take a look at some of the reasons to buy PayPal, as well as some reasons investors may want to take a cautious approach.
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As mentioned, PayPal is a highly profitable business. It generated $6.4 billion in adjusted free cash flow last year, grew adjusted EPS by 14% year over year, and reduced its outstanding share count by about 8% through aggressive buybacks.
But there's a difference between cheap and "cheap for a reason," and for the time being, PayPal fits into the latter category.
To be fair, although PayPal is a very cheap stock by most metrics, there's also significant uncertainty about the company's future. In this article, we'll take a look at some of the reasons to buy PayPal, as well as some reasons investors may want to take a cautious approach.
Will AI create the world's first trillionaire? Our team just released a report on the one little-known company, called an "Indispensable Monopoly" providing the critical technology Nvidia and Intel both need. Continue »
As mentioned, PayPal is a highly profitable business. It generated $6.4 billion in adjusted free cash flow last year, grew adjusted EPS by 14% year over year, and reduced its outstanding share count by about 8% through aggressive buybacks.
But there's a difference between cheap and "cheap for a reason," and for the time being, PayPal fits into the latter category.
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