STNE
StoneCo Ltd.
$11.00
High-Growth Software
80%
Revenue × Terminal Margin DCF
Mild
·
Conviction
Fair Value
Trading 2.5% below fair value
Bear
$15.61
+42.0%
8% rev growth, 17% terminal margin
Fair
$11.28
+2.5%
1% rev growth, 23% terminal margin
Bull
$14.86
+35.1%
1% rev growth, 26% terminal margin
Key Value Driver
Revenue growth (1%) × margin expansion to 23%
Terminal Value % of EV
62%
Implied Market Multiple
1.8x
Summary
Our base-case estimate uses a discounted cash flow model based on revenue growth and long-run free cash flow margins. We then blend that result with the average analyst price target of $17.25 from 21 analysts, using a 25% weight on analyst consensus. That produces an estimated intrinsic value of $11.28 per share.
Warnings
Our estimate assumes profit margins grow from 0% to 23% over 10 years. If that improvement stalls, the company is worth considerably less.
Gross margin of 76% means each dollar of revenue is highly profitable. As the company grows, overhead costs should shrink as a share of revenue, boosting overall profits.
Wall Street's average price target is $17.25 (from 21 analysts). Our estimate is 46% below the consensus -- consider that gap carefully.
Financial statements were converted from BRL into USD using USDBRL at 0.1993 USD per BRL.
Key Risks
- Current FCF misleads — the model values future margins, not today's cash
- SBC dilution is the hidden tax: 2-4% annual share growth compounds fast
- Revenue deceleration is inevitable — the question is when and how steep