With a number of high-profile technology companies reporting earnings recently, sorting through the noise and finding companies which have outperformed relative to their peers can be a difficult task.
In the case of PayPal Holdings, Inc. (NASDAQ:PYPL), critics have pointed to the lack of real barriers to entry in this space as one of the key reasons why PayPal may be a riskier proposition at current levels, given the relatively generous valuation multiple which has been bestowed upon PayPal at this point in time. While PayPal does not exhibit some of the sky-high valuations of its peers, a trailing 50-times earnings multiple and 6.7-times sales multiple should certainly be enough to keep cautious investors up at night.
That being said, PayPal has done an excellent job of growing its top line payment volume, increasing total payments by more than 30%.
Helping this metric along was strong performance this past quarter in foreign exchange discrepancy as well as total user growth which exceeded expectations (total accounts grew by 15% year over year). PayPal additionally has done a good job of diversifying away from major platforms such as eBay to provide payment services to a much broader spectrum of the market, with more than 85% of the company’s volume coming from outside platforms such as eBay.
As far as growth plays go, PayPal has shown some impressive momentum. As with any growth play, remain cautious with respect to valuation multiples; that said, picking strong companies which are headed in the right direction such as PayPal may not be a bad strategy in this current environment.
Invest wisely, my friends.
