May 25, 2023
Top 10 Stock PayPal Strong Buy Recommendation
How to read the ranks
For every stock, we judge its performance against its peers and rank it on a scale of 1 to 100. The higher the rank, the better the stock performs than its peers. And, we do this for six investment strategies:
Value - shows how good of a value the stock is. Green is "inexpensive"; red is "expensive".
Growth - shows a company's growth potential. Green is "high growth" expected; red is "tough times ahead".
Safety - relates to the amount of debt a company has. Green is low debt level; red is high debt level.
Combined Financial - this isn't an average of the first three ranks but rather a consolidated view across several financial indicators. Green = good; red = tread carefully.
(NEW) Sentiment - quantifies professional analyst ratings and holdings as well as market pulse. Green = positive sentiment; red = skepticism (Only available to Premium Subscribers).
(NEW) 360° View - the ultimate rating with all financial and non-financial indicators.
Snapshot: PayPal – Top 10 Stock in Employee Satisfaction Leaders in the United States
PayPal is listed as a top 10 stock on May 25, 2023 in the market index Employee Focus US because of its high performance in at least one of the Obermatt investment strategies. Two consolidated Obermatt Ranks are above-average. The company is safely financed and the professional investor sentiment is positive. Both are encouraging signals for a stock purchase decision, albeit at an above-average share price. Based on the Obermatt 360° View of 95 (top 95% performer), Obermatt assesses an overall strong buy recommendation for PayPal on May 25, 2023.
Snapshot: Obermatt Ranks
| Country | USA |
| Industry | Data Processing & Outsourcing |
| Index | Employee Focus US, Diversity USA, Human Rights, Renewables Users, NASDAQ 100, NASDAQ, S&P 500 |
| Size class | XX-Large |
When Obermatt identifies the Top 10 stocks in a market, it’s based on a certain investment strategy. The best performing stocks usually aren’t the ones that everyone is talking about (those are often "over-priced" and have low Value ranks).
For each investment strategy, we provide you with more detailed analysis and our recommendation. You see the ranks of the top 10 stocks ranked by that particular investment strategy (360° View, Sentiment, Value, Growth, Safety and Combined Financial Performance).
360° View: Obermatt 360° Assessment PayPal Strong Buy
| 360 METRICS | May 25, 2023 | |||||||
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| VALUE | ||||||||
| VALUE | 34 |
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| GROWTH | ||||||||
| GROWTH | 49 |
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| SAFETY | ||||||||
| SAFETY | 98 |
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| SENTIMENT | ||||||||
| SENTIMENT | 98 |
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| 360° VIEW | ||||||||
| 360° VIEW | 95 |
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ANALYSIS: With an Obermatt 360° View of 95 (better than 95% compared with alternatives) for 2023, overall professional sentiment and engagement for the stock PayPal are very positive. The 360° View is based on consolidating four consolidated indicators, with half below and half above average for PayPal. The consolidated Sentiment Rank has a good rank of 98, which means that professional investors are more optimistic about the stock than for 98% of alternative investment opportunities. It also rates well regarding its financing structure, with the consolidated Safety Rank at 98 or better than 98% of its peers when looking at the amount of its debt, its refinancing requirements, and its ability to service debt. But the stock is expensive and expects low growth. The consolidated Value Rank is only 34, meaning that the share price of PayPal is on the high side, compared with indicators such as revenues, profits, and invested capital. The company exhibits below-average growth momentum when looking at financial metrics such as revenue, profit, invested capital growth,and stock returns, with its Growth Rank at 49. ...read more
RECOMMENDATION: With a 360° View of 95, PayPal is better than 95% of all alternative stock investment opportunities based on the Obermatt Method. As only half of the consolidated Obermatt Ranks exhibit excellent performance, namely the positive professional market sentiment (Sentiment Rank of 98) and safe financing practices (Safety Rank of 98), the case for investing in this stock needs further thought. The Value and the Safety Ranks are below average. The Safety Rank is the least critical of the four consolidated ranks, because it only reflects financing practices. So the question is: How to assess below-average value against above-average sentiment? This may be a case where growth is in the future, not yet reflected in current performance. Companies that might fall into this category are those with intellectual property, such as technology and pharmaceutical companies. In early phases, they are expensive relative to their size and have a lot of capital on their books, as is the case here. Investors expect a better future and are willing to pay a higher price than is warranted by the current company size. These higher prices drive stock price value down in the short term. In this case, future growth may be the strongest driver of the investment case, reflected by institutional investors' opinions. With a weak Value Rank, the question is how much to sacrifice value at the cost of positive sentiment. Sometimes market sentiment is just hype, but sometimes it is right. You pay more than market-average for this stock, but it may be worth it, if the future of PayPaḷ is bright. Prudent investors may only want to invest a smaller portion of their wealth in such situations. Young investors can carry more risk but should still thrive for sufficient diversification. ...read more
Sentiment Strategy: Professional Market Sentiment for PayPal very positive
ANALYSIS: With an Obermatt Sentiment Rank of 98 (better than 98% compared with alternatives) for 2023, overall professional sentiment and engagement for the stock PayPal is very positive. The Sentiment Rank is based on consolidating four sentiment indicators, with all four indicators above average for PayPal. Analyst Opinions are at a rank of 56 (better than 56% of alternative investments), which means that, currently, stock research analysts tend to recommend a stock investment in the company. Analyst Opinions Change is also positive with a rank of 91, which means that stock research experts are changing their opinions for the better and recommending investing in the company. They are getting more optimistic about stock investments in PayPal. The Professional Investors rank is 100, which means that currently, professional investors hold more stock in this company than in 100% of alternative investment opportunities. Pros tend to favor investing in this company. Finally, Market Pulse has a rank of 67 which means that the current professional news and professional social networks are on the positive side when discussing this company (more positive news than for 67% of competitors). ...read more
RECOMMENDATION: With an Obermatt Sentiment Rank of 98 (more positive than 98% compared with investment alternatives), PayPal has a reputation among professional investors that is significantly higher than that of its competitors. Since all market sentiment indicators are positive, the professional community highly recommends investment in the company. Does this mean PayPal stocks are a safe investment? Far from it. Even professionals make mistakes. Especially in stock investing, there is a tendency to follow the leaders. Since trees don't grow to the heavens, such positive sentiment may also be interpreted as a danger sign. A lot of optimism can often be a sign of troubles to come, albeit unforeseen by most. ...read more
Value Strategy: PayPal Stock Price Value below-average critical
ANALYSIS: With an Obermatt Value Rank of 34 (worse than 66% compared with alternatives), PayPal shares are more expensive than the average comparable stock. The Value Rank is based on consolidating four value indicators, with three out of four indicators below average for PayPal. Only Price-to-Profit (also referred to as price-earnings, P/E) indicates good stock value with a rank of 64, which means that the stock price compared with what market professionals expect for future profits is lower than for 64% of comparable companies, indicating a good value concerning PayPal's profit levels. But Price-to-Sales is 46 which means that the stock price compared with what market professionals expect for future profits is higher than for 54% of comparable companies, indicating a low value concerning PayPal's profit levels. The same is valid for Price-to-Book Capital (also referred to as market-to-book ratio) with a Price-to-Book Rank of 49 and for dividend yield, which is lower than for 99% of comparable companies, making the stock more expensive compared with the company's expected dividend payouts. ...read more
RECOMMENDATION: The overall picture with a consolidated Value Rank of 34, is a HOLD recommendation based on PayPal's stock price compared with the company's operational size and dividend yields. Can we rely on only one good value indicator? Only if we know the company well. In this case, a high Price-to-Profit Rank, while Price-to-Sales and Price-to-Book are both below the market typical levels, means that the company can charge higher prices for its products and needs less capital to produce them. If this is sustainable, then PayPal is a good investment because profits count most in enterprise valuations. The low dividend yield indicates that the company is confident it can do something with the generated cash that is more valuable than paying the profits out to the shareholders in the form of dividends. ...read more
Growth Strategy: PayPal Growth Momentum low
ANALYSIS: With an Obermatt Growth Rank of 49 (better than 49% compared with alternatives), PayPal shows a below-average growth dynamic in its industry. There is limited momentum in this company. The Growth Rank is based on consolidating four value indicators, with three out of four metrics below average for PayPal. While Profit Growth has a good rank of 67, as professionals currently expect the company to grow its profits more than 67% of its competitors, all other growth indicators are below market averages. Sales Growth has a rank of 44, which means that currently professionals expect the company to grow less than 56% of its competitors, while Capital Growth has a rank of 44 and Stock Returns have been below market median, with a rank of 35 (65% of alternative investments were better). ...read more
RECOMMENDATION: The overall picture with a consolidated Value Rank of 49, is a HOLD recommendation for growth and momentum investors. While revenue growth and capital growth are good growth momentum indicators, profit is less reliable, because profits may increase due to cost-cutting measures which typically indicate negative growth momentum. "You can save a dollar only once" is the saying about such situations. Growth Investors should look at company priorities closely if they are interested in growth, because the increase in profits is not usually an indicator of growth, and stock prices have been below market, too. ...read more
Safety Strategy: PayPal Debt Financing Safety very solid
| SAFETY METRICS | May 25, 2023 | |||||||
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| LEVERAGE | ||||||||
| LEVERAGE | 66 |
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| REFINANCING | ||||||||
| REFINANCING | 70 |
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| LIQUIDITY | ||||||||
| LIQUIDITY | 87 |
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| CONSOLIDATED RANK: SAFETY | ||||||||
| CONSOLIDATED RANK: SAFETY | 98 |
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ANALYSIS: With an Obermatt Safety Rank of 98 (better than 98% compared with alternatives) for 2023, the company PayPal has safe financing practices, which means that their overall debt burden is low. This doesn't mean that the business of PayPal is safe, it only means that the company is on the safer side regarding possible bankruptcy, assuming that public reporting is correct. The Safety Rank is based on consolidating three financing indicators, where all three are above average for PayPal. Leverage is at 66, meaning the company has a below-average debt-to-equity ratio. It has less debt than 66% of its competitors. Refinancing is at a rank of 70, meaning that the portion of the debt about to be refinanced is below average. It has less debt in the refinancing stage than 70% of its competitors. Finally, Liquidity is also good at a rank of 87, which means that the company generates more profit to service its debt than 87% of its competitors. ...read more
RECOMMENDATION: With an Obermatt Safety Rank of 98 (better than 98% compared with alternatives), PayPal has a financing structure that is significantly safer than that of its competitors. These three positive financing indicators signal that the company is less likely to default on its debt obligations. However, it also means that its shareholder returns will be more modest if things go well. A low safety means fewer troubles in downtimes and less upside in good times. ...read more
Combined financial peformance: PayPal Top Financial Performance
| COMBINED PERFORMANCE | May 25, 2023 | |||||||
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| VALUE | ||||||||
| VALUE | 34 |
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| GROWTH | ||||||||
| GROWTH | 49 |
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| SAFETY | ||||||||
| SAFETY | 87 |
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| COMBINED | ||||||||
| COMBINED | 78 |
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ANALYSIS: With an Obermatt Combined Rank of 78 (better than 78% compared with investment alternatives), PayPal (Data Processing & Outsourcing, USA) shares have much better financial characteristics than comparable stocks. Shares of PayPal are low in value (priced high) with a consolidated Obermatt Value Rank of 34 (worse than 66% of alternatives) and show below-average growth (Growth Rank of 49) but are safely financed (Safety Rank of 98), which means low debt burdens. ...read more
RECOMMENDATION: An Obermatt Combined Rank of 78, is a strong buy recommendation based on PayPal's financial characteristics. As the company PayPal's critical financial metrics exhibit below-average performance, such as low value (Obermatt Value Rank of 34) and low growth (Obermatt Growth Rank of 49), it is a somewhat questionable stock investment, where the risk of paying too much for the shares is significant, unless the company has an exceptionally bright future. In this case, good financing practices (Obermatt Safety Rank of 98) are a positive sign, because it may allow the company to weather challenging times until the hoped-for cash flows materialize. This may be true for high-tech or biotechnology companies with enough cash to sustain prolonged business development. If they own properties that only provide cash flows in the future, the stock may look excessively expensive and unattractive today. In such cases, the Obermatt Method has limited value, as it is based on facts we can observe today. If the facts lie all in the future, stock investing becomes guesswork, and this should only be a driver in a limited number of investments that account for a small fraction of a safe portfolio. ...read more
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