StoneCo Stock Up 44% in 3 Months: Time to Chase or Hold Back?

Shares of StoneCo Ltd. STNE, the Brazilian fintech powerhouse, have surged an impressive 44% over the past three months, leaving both the S&P 500 composite’s 7.7% gain and the Internet–Software industry’s modest 2.1% rise far behind. This impressive rally also puts StoneCo ahead of major fintech rivals like PagSeguro Digital PAGS and DLocal Limited DLO. PagSeguro Digital, which focuses on providing digital payment solutions to small and mid-sized enterprises, climbed 18%, while DLocal Limited, a cross-border payments provider, posted a gain of 37.7%. This surge has been fueled by strong execution in its financial services business and decisive strategic moves, including divesting non-core software operations. This allows StoneCo to target more than 90% of its total addressable market, payments, banking and credit, estimated at BRL 100 billion in revenue opportunity. Crucially, its share in this vast market remains small, underscoring significant growth potential.Image Source: Zacks Investment ResearchInvestors are now wondering: Is it time to chase the stock or to take a breather?  For that, let’s take a closer look at StoneCo’s business fundamentals, strategic tailwinds and valuation to find out whether it makes a compelling case or not.StoneCo: A Focused Fintech on the RiseStoneCo’s second-quarter 2025 performance underscored its growth discipline. Adjusted net income jumped 27% year over year, while return on equity reached a robust 22%. The company’s financial services division led the charge, with ROE in that segment touching 30%. This growth came even as Brazil’s macro backdrop remained challenging, with high interest rates and signs of economic deceleration. The company’s sale of Linx billion is a strategic pivot, freeing capital to reinvest in core fintech operations or return to shareholders through buybacks. Indeed, StoneCo has already repurchased nearly BRL 2.6 billion in shares over the past year, a signal of management’s confidence.StoneCo’s Strong Operating Momentum Across SegmentsStoneCo’s MSMB (micro, small and medium business) payments segment continues to expand, with its active client base climbing 17% year over year to 4.5 million. Around 38% of these merchants now use three or more of the company’s solutions, boosting engagement and profitability. MSMB total payment volume grew 12%, fueled by rapid adoption of PIX QR Code transactions (+59%) and steady growth in card payments.Meanwhile, the company’s banking ecosystem is gaining momentum. Active banking clients rose 23% to 3.3 million, while client deposits jumped 36%. 83% of these deposits are time-based, providing StoneCo with a stable, low-cost funding source that enhances margin resilience.The credit business is also expanding prudently. StoneCo’s credit portfolio grew 25% sequentially to BRL 1.8 billion, supported by a 41% increase in merchant working capital loans. While provisioning rose amid macro caution, non-performing loan ratios remain healthy, a testament to the firm’s disciplined underwriting and risk controls.Moreover, StoneCo’s balance sheet remains solid. It ended the quarter with BRL 3.7 billion in net cash, even after significant buybacks. The company’s capital-light approach, growing deposit base and expanding credit operations suggest that profitability could further scale without heavy reinvestment.StoneCo: Earnings Estimates and Valuation AppealThe estimate revisions also echo similar sentiments, with the Zacks Consensus Estimate for both 2025 and 2026 earnings per share being revised north over the past 30 days.Image Source: Zacks Investment ResearchDespite its stellar run, STNE remains attractively priced. STNE stock has a Value Score of B.This is evident, as in terms of forward 12-month P/E, StoneCo shares currently trade at 9.93X, well off its three-year high of 31.33X and below its median of 11.03X. The stock is also trading significantly below the industry’s P/E ratio of 38.37. The stock is also trading below DLocal’s 19.35X. Meanwhile, PagSeguro Digital trades at 6.38X.Image Source: Zacks Investment ResearchSTNE: A Fintech Worth BuyingStoneCo’s recent surge reflects more than market enthusiasm. It’s backed by robust fundamentals, rising profitability and a focused strategy. With an expanding client base, disciplined capital allocation and best-in-class returns, the company is set to sustain its growth trajectory even amid Brazil’s softer macro backdrop.At under 10x forward earnings and with earnings momentum accelerating, STNE still looks undervalued. The fintech’s transformation into a leaner, more profitable financial platform makes it one of the most compelling growth stories in Latin America today. For investors seeking a balance of value and upside potential, StoneCo remains a Buy.STNE currently sports a Zacks Rank #1 (Strong Buy), and it still seems to be an opportune time for investors to capitalize on StoneCo’s momentum before the market fully prices in its upside potential. You can see the complete list of today’s Zacks #1 Rank stocks here.Beyond Nvidia: AI's Second Wave Is HereThe AI revolution has already minted millionaires. But the stocks everyone knows about aren't likely to keep delivering the biggest profits. Little-known AI firms tackling the world's biggest problems may be more lucrative in the coming months and years.See "2nd Wave" AI stocks now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report StoneCo Ltd. (STNE): Free Stock Analysis Report PagSeguro Digital Ltd. (PAGS): Free Stock Analysis Report DLocal Limited (DLO): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks