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StoneCo Grows Revenue and EPS Amidst Rising Rates

In a recent report, StoneCo detailed its third-quarter performance, citing a 35% increase in adjusted net income and a 43% rise in adjusted EPS. The company highlights solid growth in payment volumes and banking deposits, despite the challenges posed by the macroeconomic environment.

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AI Rating:   7

The report outlines significant positive developments in several key financial metrics for StoneCo. Notably, the company experienced:

  • Adjusted Net Income: Grew by 35% year over year, demonstrating strong profitability despite macroeconomic challenges.
  • Adjusted Earnings Per Share (EPS): Increased by 43% year over year, indicating effective share buyback measures and strong performance. The adjusted basic EPS reached BRL 1.97.
  • Revenue Growth: Total revenue grew by 7% year over year, with an 8% increase when accounting for changes in accounting methodology, showcasing resilience in their income generation.
  • Profit Margins: Adjusted EBIT and net income margins were reported at 21.8% and 17.5%, respectively, which reflect solid operational performance. The increase in EBITDA margin of 1.6 percentage points sequentially to above 18% also suggests improved efficiency.
  • Free Cash Flow (FCF): An adjusted net cash position of BRL 4.9 billion indicates healthy cash generation; however, this was slightly down on a sequential basis due to share buybacks.

Furthermore, the growth in payment volumes, particularly with MSMB total payment volume reaching BRL 114 billion (up 20% year over year), suggests continued demand for their services. The banking sector also saw a remarkable 50% increase in demand deposits year over year, reaching BRL 6.7 billion.

However, the rise in interest rates poses potential challenges ahead, which could affect profitability if funding costs increase significantly. The company remains focused on leveraging its strengths while navigating these market dynamics.

In summary, StoneCo shows a robust financial health with positive trajectories in various metrics, presenting a compelling case for investors monitoring its performance amidst external economic pressures.

Stocks:  STNE