PayPal (NASDAQ:PYPL) shares have underperformed this year, falling approximately 17% year-to-date, in contrast to the S&P 500, which has risen around 2% during the same timeframe. PayPal’s financial results have been varied. In Q1 2025, the firm reported earnings of $1.33 per share, surpassing expectations, although revenue fell short, totaling $7.8 billion—an increase of only 1% year-over-year—due to the company’s focus on profitability over volume, leading to a reduction in its lower-margin revenue streams. The U.S. trade conflict has affected PayPal by creating economic uncertainty that may curb consumer spending and adversely impact cross-border e-commerce and payment volumes, which are essential for PayPal’s income. Additionally, competition has been intensifying with platforms such as Apple Pay and Shopify making inroads into online checkout, which challenges PayPal’s market leadership.
Nonetheless, PayPal stock appears quite appealing at its current market price of approximately $71. We reach this assessment by evaluating the present valuation of PYPL shares alongside its operational performance in recent years and its current as well as historical financial health. Our evaluation of PayPal based on critical metrics of Growth, Profitability, Financial Stability, and Downturn Resilience indicates that the firm possesses a strong operational performance and financial standing, as outlined below. However, if you are looking for potential gains with less volatility than individual stocks, the Trefis High Quality portfolio offers an alternative option – it has outperformed the S&P 500 and yielded returns surpassing 91% since its launch.
How Does PayPal’s Valuation Compare To The S&P 500?
Based on what one pays per dollar of sales or profit, PYPL stock appears slightly undervalued relative to the broader market.
• PayPal boasts a price-to-sales (P/S) ratio of 2.3 compared to a figure of 3.0 for the S&P 500
• Furthermore, the company’s price-to-free cash flow (P/FCF) ratio stands at 9.9, while the S&P 500 registers at 20.5
• Additionally, it has a price-to-earnings (P/E) ratio of 17.8 as opposed to the benchmark’s 26.4
How Have PayPal’s Revenues Evolved Over Recent Years?
PayPal’s Revenues have experienced some growth in recent years.
• PayPal’s top line has grown at an average rate of 7.8% over the past 3 years (versus a 5.5% increase for the S&P 500)
• Its revenues have increased by 6.8% from $30 billion to $32 billion in the last 12 months (in comparison to 5.5% growth for the S&P 500)
• Additionally, its quarterly revenues grew by 4.2% to $7.8 billion in the latest quarter from $7.7 billion a year earlier (compared to a 4.8% increase for the S&P 500)
How Profitable Is PayPal?
PayPal’s profit margins are approximately at the median level for firms in the Trefis coverage universe.
• PayPal’s Operating Income during the previous four quarters was $5.8 billion, representing a moderate Operating Margin of 18.1% (versus 13.2% for the S&P 500)
• PayPal’s Operating Cash Flow (OCF) for this duration was $7.5 billion, indicating a moderate OCF Margin of 23.4% (versus 14.9% for the S&P 500)
• For the last four-quarter period, PayPal’s Net Income was $4.1 billion, which demonstrates a moderate Net Income Margin of 13.0% (compared to 11.6% for the S&P 500)
Is PayPal Financially Stable?
PayPal’s balance sheet appears robust.
• PayPal’s Debt stood at $9.9 billion at the close of the most recent quarter, while its market capitalization is $70 billion (as of 6/13/2025). This results in a strong Debt-to-Equity Ratio of 13.4% (compared to 19.9% for the S&P 500). [Note: A lower Debt-to-Equity Ratio is preferred]
• Cash (including cash equivalents) accounts for $11 billion of the $81 billion in Total Assets for PayPal. This results in a strong Cash-to-Assets Ratio of 13.3% (versus 13.8% for the S&P 500)
How Resilient Is PYPL Stock During Economic Downturns?
PYPL shares have felt an effect that was slightly worse than the S&P 500 index during certain recent downturns. While investors remain hopeful for a mild landing by the U.S. economy, what could transpire if another recession occurs? Our dashboard How Low Can Stocks Go During A Market Crash illustrates how key stocks performed during and after the last six market crashes.
Inflation Shock (2022)
• PYPL shares declined 41.9% from a high of $308.53 on July 23, 2021, to $179.32 on December 1, 2021, compared to a peak-to-trough decline of 25.4% for the S&P 500
• The stock is still not back to its pre-Crisis high
• The highest price the stock achieved since then was 197.35 on December 8, 2021, and it is currently trading around $71
Covid Pandemic (2020)
• PYPL shares fell 20.3% from a peak of $121.30 on July 24, 2019, to $96.64 on October 23, 2019, contrasted with a peak-to-trough drop of 33.9% for the S&P 500
• The stock completely rebounded to its pre-Crisis peak by February 14, 2020
Putting Everything Together: What It Means For PYPL Stock
In conclusion, PayPal’s performance across the outlined parameters is summarized as follows:
• Growth: Strong
• Profitability: Neutral
• Financial Stability: Very Strong
• Downturn Resilience: Neutral
• Overall: Strong
This correlates with the stock’s moderate valuation, which leads us to conclude that it is fairly priced, suggesting that the stock could be a relatively solid buy.
Although there may be some potential upside for PYPL shares, the Trefis Reinforced Value (RV) Portfolio has outperformed its all-cap stocks benchmark (comprised of the S&P 500, S&P mid-cap, and Russell 2000 benchmark indices), delivering strong returns to investors. Why does this happen? The quarterly rebalanced mix of large-, mid-, and small-cap RV Portfolio stocks has offered a responsive means to capitalize on favorable market conditions while mitigating losses when markets decline, as detailed in RV Portfolio performance metrics.
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