Is Takeout Target PayPal a Buy?

PayPal (NASDAQ: PYPL) recently turned down an offer to be acquired by Stripe and Advent for $60.50 a share, and that looks like a smart move. While the stock has been decimated, losing 80% of its value over the past five years, the company is still growing its revenue. Its valuation is very cheap, with it trading at a forward price-to-earnings (P/E) ratio of just 10 times 2027 analyst estimates. Most importantly, though, the company remains a free cash flow machine.

While PayPal has struggled with weakening transaction margins (similar to gross margins), it continues to see solid revenue growth. In the second quarter, its revenue rose 5% to $8.86 billion, while total payment volumes (TPV) climbed 10% to $486.5 billion. Higher-margin branded TPV increased by 2%, similar to last quarter. Venmo and Braintree continued to be standouts with mid-teens TPV growth.

Transaction margin dollars, meanwhile, rose 1% to $3.9 billion, and were up 3% excluding interest on customer balances. The number of PayPal's active accounts stayed steady at 439 million, while the number of transactions climbed 8%.

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Source Fool.com