-
Curious if PayPal stock is a hidden bargain or a value trap? Here is a closer look at what is really happening under the hood for investors looking to make an informed move.
-
In the last week, PayPal shares have climbed 2.2%. However, this follows a challenging 30 days where the price slid nearly 10% and significant losses were recorded over the past year.
-
News of PayPal’s ongoing product innovations, along with management’s recent comments on competition, continue to attract attention. These updates are fueling debate about whether the company is positioned for a turnaround or facing further risks in a competitive digital payments market.
-
The company currently scores a 5 out of 6 on our undervalued checks, suggesting there is more to its valuation than meets the eye. This article will review traditional methods for valuing PayPal in the next section. A guide to an even clearer way of assessing true value will follow at the end of the article.
Find out why PayPal Holdings’s -26.3% return over the last year is lagging behind its peers.
The Excess Returns model estimates the long-term value of PayPal Holdings by evaluating the company’s ability to generate returns on its invested capital above the cost of equity. This approach measures how efficiently PayPal converts its capital base into sustainable profits that exceed the returns required by investors for bearing risk.
For PayPal, the data shows a Book Value of $21.46 per share and a Stable EPS of $6.20 per share, which is calculated using future Return on Equity estimates from 10 analysts. The Average Return on Equity stands at 24.41%. With a Cost of Equity of $1.97 per share and an Excess Return of $4.23 per share, PayPal appears to be delivering value above its capital costs. The Stable Book Value is projected at $25.40 per share, based on projections from 8 different analysts.
Based on these measures, the Excess Returns model estimates PayPal’s intrinsic value at $119.86 per share. This is about 47.8% higher than the current price and suggests the company may be undervalued when considering its ability to consistently generate returns above its cost of capital.
Result: UNDERVALUED
Our Excess Returns analysis suggests PayPal Holdings is undervalued by 47.8%. Track this in your watchlist or portfolio, or discover 928 more undervalued stocks based on cash flows.
PYPL Discounted Cash Flow as at Dec 2025
For profitable companies like PayPal Holdings, the Price-to-Earnings (PE) ratio is a widely used and reliable metric for valuation. The PE ratio reflects how much investors are willing to pay for a dollar of current earnings. Higher values often signal expectations of strong growth or lower risk, while lower values may suggest higher perceived risks or a more modest growth outlook.
Story Continues
At present, PayPal trades at a PE ratio of 11.91x, which stands below both its Diversified Financial industry average of 13.97x and the peer group average of 58.80x. These benchmarks provide helpful context for where the market sees PayPal relative to its direct competitors and the broader sector. However, simply comparing a company’s PE ratio to those of peers or the general industry can overlook critical differences in business models, profit margins, growth rates, and risk profiles that are unique to each company.
This is where Simply Wall St’s Fair Ratio comes in. The Fair Ratio is a tailored valuation multiple calculated using factors like PayPal’s expected earnings growth, industry characteristics, profit margins, company size, and risk profile. For PayPal, the Fair Ratio is 18.04x. Since this is meaningfully higher than the current PE ratio, it indicates that PayPal is trading at a discount to its fundamentally justified value based on its outlook and risk-adjusted prospects. This makes it look undervalued by this measure compared to simply relying on peer or industry comparisons.
Result: UNDERVALUED
NasdaqGS:PYPL PE Ratio as at Dec 2025
PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1441 companies where insiders are betting big on explosive growth.
Earlier we mentioned that there is an even better way to understand valuation, so let’s introduce you to Narratives. A Narrative is an easy, dynamic tool that lets you explain your perspective on a company by linking its story, such as business strategy, product launches, or market shifts, to specific financial forecasts and an estimated fair value.
Instead of only looking at ratios or peer benchmarks, Narratives help you map your own view of the future by reflecting your estimates for revenue growth, margins, and earnings, then calculating an actionable fair value from those assumptions. These Narratives are available to all investors in the Community section on Simply Wall St and are used by millions worldwide.
As new earnings or news headlines break, Narratives update dynamically, ensuring your scenario always reflects the latest information. This means you can easily check if your Fair Value is above or below the current market price, helping to clarify when you feel confident to buy or when caution may be wise.
For example, one investor’s Narrative might value PayPal Holdings as high as $120 per share based on bold growth and margin expansion, while a more conservative Narrative could see its fair value near $62 if competitive and regulatory risks dominate. Narratives let you test, share, and refine your stock decisions with clarity and control.
Do you think there’s more to the story for PayPal Holdings? Head over to our Community to see what others are saying!
NasdaqGS:PYPL Community Fair Values as at Dec 2025
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Companies discussed in this article include PYPL.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com