Premium content from Motley Fool Share Advisor UK
Our monthly Fire Best Buys Now are designed to highlight our team’s three favourite, most timely Buys from our growing list of growth-focused Fire recommendations, to help Fools build out their portfolios.
“Best Buys Now” Pick #1:
PayPal (NASDAQ:PYPL)
- PayPal disappointed the market with slightly weak H2 margin expansion and sales growth guidance but aside from that we thought Q1 results from the payments provider were quite good.
- Revenue rose 10% in constant currency terms (9% actual) to $7bn and operating profit rose over 40% to $1bn as the effects of cost cuts across the business began to pay off.
- That the company grew sales this quickly despite the marked decrease in e-commerce growth off of pandemic highs points to the good work management have done to expand market share at the expense of less diversified payments providers. We reckon this bodes well for the company’s ability to see off challengers in the long-term.
- In a market where profits and financial health are king, PayPal is well-positioned with management embarking on an efficiency drive to boost margins and cash flow in the medium-term. Any substantial increase in cash flow would be great for investors as management would likely add to the planned $4bn in share buybacks pencilled in for 2023 (roughly 5.5% of the company’s market cap at the time of writing).
- At 26 times trailing earnings, PayPal isn’t dirt cheap. But for a growing, highly profitable business returning to a of cash to its investors we think it’s worth taking a closer look at in June.
