I wrote up PayPal on March 20th when the stock was 30x EV/EBIT and traded at a 3.86% free cash yield.
On Monday, I noticed that the stock had dropped to 21x EV/EBIT and the free cash yield was up to nearly 6%.
In my opinion, nothing has changed with the business from when I wrote it up a month ago.
The only thing that has changed is the stock price.
On Monday, I bought some PayPal.
This is the current composition of the portfolio tracked on this substack after this trade:
The current price strikes me as an incredible opportunity for a company with a moat, 15-20% growth, and nearly 20% return on equity without the use of heavy leverage.
In the short term, will it drop further? Will the rotation continue? Will interest rates continue to rise? Will we have a recession?
I haven’t the slightest idea.
What I do know is that PayPal appears to me to be a wonderful company trading at a wonderful price. I plan to hold it for years and I believe I will experience a satisfactory return on the investment from the current price.
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