Key Takeaways
- PayPal’s shares are trading at a historically low forward price-to-earnings multiple of around 13.7, suggesting market expectations of stagnant growth.
- This pessimistic valuation contrasts sharply with the company’s robust, double-digit earnings per share (EPS) growth, which is forecast to be approximately 20 per cent in 2025 over 2024.
- The market’s caution appears fixated on moderating revenue growth, which has settled into single digits, rather than the sustained profitability driven by operational efficiencies and share buybacks.
- Aggressive share repurchase programmes, which reduce the share count by roughly 4 per cent annually, are a key driver amplifying per-share earnings even as top-line growth slows.
- While risks from competition and macroeconomic headwinds remain, there is a significant disconnect between the company’s fundamental performance and its current market price, suggesting it may be undervalued.
The notion that PayPal Holdings’ shares are valued as if the company has hit a growth wall invites scrutiny, particularly when its price-to-earnings ratio hovers near historic lows while earnings per share continue to expand at a double-digit clip. This apparent mismatch—where market pricing suggests stagnation despite robust profitability metrics—raises questions about whether investors are overlooking underlying strengths or fixating on softer revenue trends.
Dissecting the Valuation Disconnect
PayPal’s current forward price-to-earnings multiple of around 13.7 times, based on analyst estimates for the coming year, marks a stark departure from the premiums it commanded during peak fintech enthusiasm. This low multiple implies expectations of minimal expansion, yet the company’s EPS has been growing at rates that belie such pessimism. Contrast this with the price-to-sales ratio, which has contracted to approximately 2 times, a level reflecting subdued revenue growth where quarterly top-line increases have moderated to single digits.
| Metric | Value | Context (as of mid-2025) |
|---|---|---|
| Forward P/E Ratio | ~13.7x | Based on analyst estimates for the coming year. |
| Trailing P/E Ratio | 15.11x | As of mid-July 2025. |
| Price-to-Sales Ratio | ~2.0x | Among the lowest levels in recent years. |
| Revenue Growth (YoY) | 5% | For Q2 2025. |
| Trailing Twelve-Month EPS | $4.67 | Reflects continued profitability. |
| Full-Year 2025 EPS Guidance | $5.15 – $5.30 | Represents ~20% growth over 2024. |
| Free Cash Flow (2024) | $6.77 Billion | Up 60% year-over-year. |
For instance, the second quarter of 2025 saw revenue rise 5 per cent year-over-year to $8.29 billion, surpassing expectations but highlighting a slowdown from the heady double-digit surges of prior years. Yet, this revenue pace has not halted EPS momentum, which benefited from margin expansions and a disciplined cost structure, suggesting the market’s valuation lens may be unduly narrow.
EPS Growth Amid Revenue Moderation
The resilience in earnings per share growth stands out as a counterpoint to the narrative of stagnation. Analysts noted that PayPal’s latest quarterly adjusted EPS of $1.40 exceeded consensus by a notable margin, prompting upward revisions to full-year guidance. The company now anticipates non-GAAP EPS between $5.15 and $5.30 for 2025, up from prior ranges, equating to roughly 20 per cent growth over 2024 levels. This acceleration stems partly from aggressive share buybacks—reducing outstanding shares by about 4 per cent annually in recent models—which amplify per-share metrics even as revenue growth tempers.
Delving deeper, historical EPS trajectories reveal a compound annual growth rate exceeding 15 per cent over the past five years. This persists despite revenue CAGR settling around 8 per cent in simplified valuation models. The disconnect amplifies when considering free cash flow generation, which surged 60 per cent to $6.77 billion in 2024, providing ammunition for further buybacks and investments that could sustain EPS uplift without relying solely on top-line expansion.
Market Sentiment and Analyst Perspectives
Sentiment from verified financial sources leans towards optimism on this valuation theme, with some analysts labelling PayPal as “highly undervalued,” citing strong fundamentals and buyback aggression. Post-earnings revisions saw price targets lifted, reflecting a consensus view that the low multiples undervalue the company’s turnaround efforts. Average analyst ratings assign a ‘Buy’ stance, implying potential upside to targets around $90 or higher, which would represent a 30-40 per cent premium from recent prices.
However, this sentiment is not unanimous; some caution that persistent single-digit revenue growth could cap re-rating potential unless innovations in payment volumes or new product lines accelerate. Total payment volume grew 15 per cent year-over-year in recent quarters, yet this has not fully translated to revenue amid competitive pressures. Model-based forecasts project a PEG ratio below 1, suggesting the stock’s price does not yet reflect even modest growth assumptions.
Historical Context and Forward Implications
Working backwards from current levels, PayPal’s share price of $67.11 at the close on 3 August 2025—down 2.4 per cent on the session—compares unfavourably to its 52-week high of $93.66, a drop of over 28 per cent. This slide has compressed valuations further, with the price-to-book ratio at 3.19 times, against a book value of $21.04 per share. Historically, during periods of similar EPS growth in 2020-2022, multiples expanded to 20-25 times, implying room for reversion if revenue trends inflect positively.
Analyst-guided forecasts for 2026 anticipate EPS climbing towards $6, potentially justifying a PE multiple of 20 if growth narratives regain traction. This could propel shares to $120 or beyond. Yet, the implicit question lingers: if EPS continues its double-digit path, can the market sustain pricing that assumes no growth? Recent earnings beats and guidance hikes suggest a tipping point may be near, though execution on revenue acceleration remains key.
Risks to the Undervaluation Thesis
While the low multiples highlight potential mispricing, risks abound that could validate the market’s caution. Competitive encroachment in fintech, with rivals eroding market share, has tempered revenue growth to 4-5 per cent in recent trailing periods. Should EPS growth falter—perhaps from margin pressures or a reduced buyback pace—the valuation floor might prove illusory. Moreover, macroeconomic headwinds, such as fluctuating consumer spending, could exacerbate the revenue drag, keeping multiples suppressed.
Nevertheless, the core implication endures: PayPal’s pricing today embeds an overly pessimistic view, one that double-digit EPS advances challenge directly. Investors eyeing this disconnect might find opportunity in the gap between current multiples and historical norms, provided the company sustains its profitability momentum.
Data referenced as of 3 August 2025. Inspired by sentiment in social media posts dated prior to this analysis.
References
Benzinga. (2025, July). These analysts revise their forecasts on PayPal following Q2 results. Retrieved August 4, 2025, from https://benzinga.com/analyst-stock-ratings/price-target/25/07/46734196/these-analysts-revise-their-forecasts-on-paypal-following-q2-results
em013L [@em013L]. (2024, May 9). [Post regarding PayPal’s financial position]. X. https://x.com/em013L/status/1788930512980963653
FinFluentialX [@FinFluentialx]. (2024, June 7). [Post discussing PayPal’s valuation]. X. https://x.com/FinFluentialx/status/1799732142790050200
Investing.com. (2025, July 29). Earnings call transcript: PayPal Q2 2025 beats forecasts, stock falls. Retrieved August 4, 2025, from https://investing.com/news/transcripts/earnings-call-transcript-paypal-q2-2025-beats-forecasts-stock-falls-93CH-4157698
Kross_Roads [@Kross_Roads]. (2025, July 30). [Post about PayPal’s earnings]. X. https://x.com/Kross_Roads/status/1818705082021446064
MacroTrends. (n.d.). PayPal Holdings PE ratio 2010-2025 | PYPL. Retrieved August 4, 2025, from https://www.macrotrends.net/stocks/charts/PYPL/paypal-holdings/pe-ratio
Nasdaq. (2025, July). PayPal raises full-year EPS guidance. Retrieved August 4, 2025, from https://nasdaq.com/articles/paypal-raises-full-year-eps-guidance
Natan [@nataninvesting]. (2024, April 15). [Post regarding PayPal’s valuation]. X. https://x.com/nataninvesting/status/1779480373346320427
Saxena, P. [@saxena_puru]. (2023, November 28). [Post about PayPal’s business model]. X. https://x.com/saxena_puru/status/1729111663805407588
Seeking Alpha. (2025, July 26). PayPal: Strong fundamentals, aggressive buybacks, highly undervalued, a long-term buy. Retrieved August 4, 2025, from https://seekingalpha.com/article/4807672-paypal-strong-fundamentals-aggressive-buybacks-highly-undervalued-a-long-term-buy
StockAnalysis.com. (n.d.). PayPal Holdings, Inc. (PYPL) statistics. Retrieved August 4, 2025, from https://stockanalysis.com/stocks/pypl/statistics/
TipRanks. (n.d.). PayPal Holdings (PYPL) earnings date & report. Retrieved August 4, 2025, from https://www.tipranks.com/stocks/pypl/earnings
Yahoo Finance. (n.d.). PayPal Holdings, Inc. (PYPL) key statistics. Retrieved August 4, 2025, from https://finance.yahoo.com/quote/PYPL/key-statistics/
Yahoo Finance. (n.d.). PayPal Holdings, Inc. (PYPL) stock price, news, quote & history. Retrieved August 4, 2025, from https://finance.yahoo.com/quote/PYPL/
YCharts. (n.d.). PayPal PE ratio. Retrieved August 4, 2025, from https://ycharts.com/companies/PYPL/pe_ratio
