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PayPal Is An Undervalued Growth Opportunity

Summary

PayPal's cash flow from operating activities is steadily rising, climbing by 28 percent to $323 million in Q2 2016..

Since Q2 2015, customer numbers rose by 11 percent.

The partnership with Visa offers long-term fee certainty and additional growth opportunities.

Acquisitions like Venmo and XOOM are complementing PayPal's service portfolio.

The payment company PayPal (NASDAQ:PYPL) just published their Q2 2016 results. Shortly after, the company's shares were down 7 percent. The reason for this was PayPal's announcement to work closer with the credit card provider Visa (NYSE:V). Many analysts claim that the deal gives Visa the better economics. Royal Bank of Canada even cut PayPal's 2017 earnings estimates. But was this deal really so bad? I don't think so.

PayPal's financial and growth background

PayPal's cash flow from operating activities is steadily rising, climbing by 28 percent to $323 million in Q2 2016. Furthermore, the company is pretty profitable. CFO to sales ratio amounted 12 percent and the transaction margin is around 60 percent.

Much more important is PayPal's strong customer growth and customer engagement. Since Q2 2015, customer numbers rose by 11 percent...


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