This Payment Processor Is Flush With Cash… and Has Big Growth Ahead

|August 28, 2023

A Note From Amanda: Exciting news… Alpesh’s proprietary stock-picking system is getting an upgrade! Alpesh was among the first investors to start using the data-crunching power of AI to boost his stock market returns… and he’ll soon reveal exactly how he does it. You’ll be among the first to hear about this one-of-a-kind event, so stay tuned!

Latin America is hot… especially when it comes to the fintech sector.

The number of new fintech platforms created in the region soared 112% from 2018 to 2021. And a quarter of all fintech platforms worldwide can be found in Latin America.

That’s one reason I’m excited about the prospects for this week’s Stock of the Week.

It’s a fast-growing payments processor headquartered in Uruguay. It connects merchants to customers all over the world with hundreds of local payment methods.

That means we get not only a play that’s geographically diverse… but also exposure to an attractive emerging market.

And when we run the numbers on the company… we see there’s a lot to like. This cash king has one of the best CROCI scores – that’s cash return on capital invested, my favorite metric – in the market.

For these reasons and more, it’s this week’s Stock of the Week.

Get all the details on the company – including the ticker – in my latest video.

Click on the image below to watch it.



It’s Stock of the Week time, friends. Every week, I try to make it fascinating, interesting, educational and informative. And this week is no exception, as you would expect.

Hello, I’m Alpesh Patel, founder of GVI Investor and also a hedge fund manager. My team every week put in front of me several stocks, shortlisted out of 10,000, which they want to bring to my attention. I then share with you one which I think is of interest to, well, all of us… not just to you but also to me and what’s happening in the broader market.

So this week’s Stock of the Week is dLocal (DLO), established in 2016. It’s a Uruguay-based company, which gives it a bit of exposure to Latin America, but it is listed in the United States – on the Nasdaq, for that matter.

It operates a payment processing platform worldwide. Worldwide. So, again, online payments. Now, I really think the companies which are involved in online payments – as long as they’re not overvalued, such as PayPal was – should give us good exposure to what’s happening in the region and potentially around the world.

The company enables global merchants to connect with over 600 local payment methods across different geographic regions. That means those merchants can sell their products and services, obviously, worldwide. The company works the in retail, ride hailing, financial, advertising, software as a service, travel, e-learning and gaming sectors. So it’s not reliant on either one geographic region or one industry. It’s always good to have diversification from within a company.

The market cap is – wait for it – $5.6 billion. The company’s earnings are expected to grow over the next three years.

So let’s have a look at some of those numbers. And it’s really from the numbers that I decide these things in any event, because those are the things that matter to me the most.

Now, looking at my proprietary Growth-Value-Income scoring, out of 10, it’s got an 8. Anything with a 7 or higher meets my minimum criteria. Remember, this is based on my proprietary algorithm, which measures the valuation of a company, such as its share price to its profitability… its growth in revenues, growth in profits… its dividend yields… and so on.

The forecast P/E is a little bit expensive here. A little bit expensive. The forecast P/E is a multiple of 35. In other words, the current share price is 35 times the company’s anticipated or expected or forecast profits. That’s a high multiple.

However, making up for it to some extent is the cash return on capital invested, or CROCI. And if you want to know why this Deutsche Bank-invented and Goldman Sachs-used ratio is so important to stock price performance, this link here will explain it. DLocal’s CROCI of 40% makes it one of the best in the entire stock market. So that’s important as well, in particular for me.

Now, going on to the stock itself, it’s taken a bit of a pummeling. And I think to some extent that is what makes it even more attractive at the moment. Just the drop that it’s had over the last… well, since the IPO, basically since 2021. And it seems to have had a base at about $9. It’s now doubled since hitting that base. So I think the initial overexuberance has died away and now we’re starting to see that move up potentially.

On a discounted cash flow basis, it’s, again, potentially expensive. So there are a couple of red flags in terms of valuation.

However, earnings are forecast to grow significantly over the coming year and over the long term as well.

So there’s a lot going for it. And it’s quite insightful in terms of what’s going on in the world and how we shouldn’t fall into the trap of buying the flavor of the month.

Valuation is important. And the cautionary note here is that this company remains a little bit overvalued.

Thank you.