Hypergrowth fintech business - StoneCo (STNE)

I have recently invested in STNE and this business has all the attributes this board cherishes - a newly listed, hypergrowth story with a long runway for growth.

Added bonus is a super cheap valuation.

Details are provided below -

Fintech merchant acquirer business in Brazil; founded in 2012

Sells POS payment devices to SMBs and SMEs, which enable these merchants to accept credit/debit card payments

Company provides solutions for offline, online and mobile channels

4th largest market share in Brazil (6.1%); behind Cielo, Rede and GetNet - Pageseguro is in the 5th position

Company prides itself for its customer-centric approach; provides exceptional customer service at competitive rates

Business also provided enterprise software solutions, analytics etc so merchants can track payments, business data

Three sources of revenue - payment processing fees, POS device rentals and financial income (net margin on providing finance to merchants)

The company’s take rate has increased to 1.87% from around 1.5% in 2017; so payment processing is becoming more lucrative

Initially, the business targeted larger merchants but now it is going after micro-merchants as they generate a higher take rate due to lack of options

In Q3 '18, revenue grew 121% yoy; number of merchants increased to 234k (+127% yoy) and Total Payments Volume rose 84%

Company has recently beefed up its sales force and is opening lots of StoneHubs (1 per week) to attract new merchants/provide good service

The company completed its IPO in October 2018 at $24, stock quickly popped to $32 and is now down to around $18 (due to market sell-off)

Business was founded by two guys; both experienced entrepreneurs in the Brazilian fintech/payments space

Management team is solid and deep

Berkshire Hathaway owns 11% of the shares, Walmart family owns 20%, Alibaba invested US$100m, Jorge Paulo Lemann is an investor

T. Rowe Price is a major shareholder and so is the ex-Chairman of the Brazilian central bank

Valuation - 2019 EPS is likely to come in around $0.80, so business is trading at 22.5 times forward earnings which is cheap (0.5 PEG!)

Fintech in Brazil has a long runway for growth and the company has plans to expand overseas in South America

In my view, this business will benefit from two major secular tailwinds -

a. Digital payments/fintech

b. e commerce

Both of these areas are still in their early innings in Brazil; so STNE’s hypergrowth could continue for many years AND with so many billionaire investors backing this business, it could turn out be a big winner.

One could argue that STNE is Latin America’s SQ but please don’t go by my word, do your own due diligence. Here is the website - https://www.stone.co/


Thanks GrowthMonkey. Can you provide the source that shows Stone is 4th largest? I understand MercadoPago (part of MELI) to be a fast grower in Brazil and LATAM as a whole. Quick search in Brazil shows the below ---- with MELI in 2nd (behind PayU) and Stone in 7th.



You are welcome.

I found the info from the Nilson Report and the below link also states that StoneCo is the 4th largest player based on total volume -




Thanks for the writeup.

I have invested in competitor PAGS for similar reasons. Top line growth rates not as eye catching, but still 60%+ off a larger rev base,and the historical comps very similar when PAGS was circa usd$500M per year.

Better gross margins at STNE

In terms of revenue PAGS is something like 2x bigger than STNE.

There is a lot of competition in the space, which limits my enthusiasm for LatAm fintech slightly. Bit it is likely not a zero sum game. MELI very active in this space also

The ecosystems that these companies build will likely be a key the differentiator.

PAGS seems slightly more focused on micro merchants vs STNE.


Id be interested in anyone with local insight into the sector.


STNE has started making its move and its stock has just broken out of its severe post IPO downtrend.

This is a hyper growth business (revenue growth more than doubling yoy) and seems to have a long runway for growth.

Normally, I am weary of investing in Latin America due to corporate governance concerns, but this business is backed by multiple billionaires (Buffett, Jack Ma, Walmart family, Jorge Paulo Lemann plus T. Rowe is an investor).

Despite recent run up, STNE’s valuation remains super cheap - bargain basement cheap.


In today’s weak tape, STNE is up almost 5% and since my original write-up a few weeks ago, the stock has appreciated 35%.

Although this stock has now decisively broken out from its downtrend and is now climbing, there is a very good chance that this business will continue to grow rapidly for many years; thereby rewarding its shareholders.

I’ve added to my position at the open today and plan on sitting tight for the long haul (or until STNE’s business deteriorates).




I’m also interested in StoneCo because of its list the combination of institutional ownership, attractive valuation, and compelling growth prospects.

I live in Mexico and a lot of these Latam fintechs are concentrating on South America. MercadoLibre is here, but I haven’t seen any MercadoPago terminals. What I have seen, and I’m posting this message just to share, is that our local convenience stores (Oxxo) are now selling IZettle terminals alongside burner cell phones. Looks like Paypal is entering the space as well.


Thanks for your feedback.

I’m long STNE and the stock is up nicely since my investment a few weeks ago. In my view, STNE has a bright future and its current valuation is just silly cheap!

This company is more than doubling its revenue y-o-y and its earnings are likely to grow by 110% CAGR over the next 3-5 years. Yet, the stock is trading at a forward PE of just 28 (PEG ratio of 0.28)!

It really is quite unbelievable!!

I’m also long MELI and PYPL


This company is more than doubling its revenue y-o-y and its earnings are likely to grow by 110% CAGR over the next 3-5 years.

Interesting company :slight_smile:

From where do you get this growth projection? It seems to me the bar is set quite high. Some might be a little anxious that anything less than 100% growth will make the stock price go through the floor.

Also, how do you handle the quarterly numbers? They report in Reais, not USD. Is it just a question of converting the numbers to USD using the current rate and then do the analysis from that number?


You can get the 3-5 yr projected EPS CAGR for most companies from Zacks

Re numbers; I look at the growth of the business in local currency terms and then also in US Dollars. The growth in the local currency tells me how well a business is really doing in its home country.

Yes, I convert the numbers to US Dollars as the current exchange rate.

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They knocked earnings out of the park…I think rev. growth 100%+YoY. Up 25% AH.

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