PayPal (PYPL): fair value

Fair-value band

The normal range for this name runs from $45 (cheap) to $85 (expensive); it is now priced at $57.

That is 0.6σ below this name's own normal premium.

Is PayPal undervalued?

Fair, relative to its own history. PayPal trades at $57, 29% below the fair value this model estimates, but it has habitually traded 19% below fair value, and today's gap is 0.6σ below that norm, within the range it normally trades in, so the verdict is Fair: priced normally for itself, not necessarily fairly valued.

Diligence checklist

8 pass · 1 fail · 2 no data

• PASSCash actually collected from profit, last 12 months: 130%XBRL · PayPal gets $1.30 of real cash for every $1 of reported profit which means profits are real and not just numbers on paper. That's a good sign.
• PASSGap between paper profit and real cash: -3.2%XBRL · PayPal's "profit on paper" and "cash in the bank" gap is small enough to pass.
• PASSDebt compared to one year of cash earnings: 0.36xXBRL · PayPal could pay off everything it owes, net of the cash it holds, with 0.36 of a single year's earnings. My limit for a name I would buy is three years, so debt is not a risk here.
• PASSHow much more it earns on capital than that capital costs: +4.20ppXBRL · PayPal earns 4.2 points more on the capital it employs than that capital costs. That clears the bar, but only just: a slightly worse year or a slightly higher cost of money and this business is running to stand still. The gap is wider than it was at the start of the window.
• PASSStock sold by executives and directors on the open market, last 6 months: $0.0MEDGAR · Nobody running PayPal sold a single share on the open market in the last 6 months. That is the alignment I want: the people with the most information about the business are keeping their money in it. A further $2.0M went out under pre-planned 10b5-1 schedules, which I don't count: those sales are set up months ahead and say nothing about what management thinks today. 1 amended filing is left out so nothing is counted twice. Options being exercised, and shares held back to cover the tax on them, are not sales and I don't count them either.
• FAILHow long the CEO has run this company: 0.6 yearsTEXT · PayPal's chief executive took the job on March 1, 2026, 0.6 years ago. I want a full cycle at the company, which I take as 5 years, before a management record tells me anything: a short run has not yet been tested by a bad year. filing ↗
• N/AProfit margin held up during the last sales slump: n/aXBRL · There's no revenue downturn in PayPal's filed record, or gross profit isn't tagged, so this test has nothing to measure. It needs a bad patch to look at: without one, whether customers would stay through a price rise is untested rather than proven.
• PASSNormal profit margin across a full business cycle: FCF margin 20.4% vs 18.1% medianXBRL · PayPal's current cash margin (20.4%) is a bit above its long-run average (18.1%). This is a mild warning rather than a problem: don't assume today's good margin lasts forever. My valuation grows the long-run average, not the temporarily high figure. Across the window the margin ran between 11.9% in September 2023 and 23.4% in September 2024.
• N/AHow much of the stock trades on an average day: $599MMARKET · PayPal trades about $599M of stock a day. Taking a fifth of that for ten sessions, I could build or exit roughly $1,197M without leaning on the price. There's no pass or fail here because the answer depends on how big a position I'd actually want to take.
• PASSShare of revenue from its single biggest customer: no customer 10%+ of revenue disclosedTEXT · PayPal's February 3, 2026 10-K doesn't disclose any customer at 10% or more of revenue. The accounting rules require that disclosure only when it applies, so its absence means no single customer clears that bar, which is well inside the quarter of revenue where I stop work. This comes from the filing's prose rather than a tagged number: the percentages sit in an XBRL field the SEC's bulk data drops. filing ↗
• PASSWhether the company switched auditors in the last 2 years: noneEDGAR · Companies sometimes switch accounting auditors right before something bad is uncovered which can be a warning sign. PayPal hasn't changed auditors in the last 2 years, so there's no such red flag here.