PayPal's (PYPL 1.65%) stock has not been spared from getting slashed, but the company remains strong fundamentally. In this clip from "The Rank" on Motley Fool Live, recorded on June 13, Motley Fool contributor Connor Allen discusses why PayPal is a winner despite being far from its all-time high.
Connor Allen: If you look at this chart here, you can see that they are 75% off of all-time highs. This is a company that has just been slashed. I feel it's one of the staples for this downturn. When people think about companies that have really struggled, maybe not fundamentally, but at least in the eyes of the market.
Jason Hall: It's a beaten down winner here.
Allen: Yes. Definitely a beaten down winner. There have been some guidance changes as of late in terms of what they're expecting for revenue growth for the foreseeable future, and those numbers have gone down a little bit. If you're looking at the company right now, they have really good free cash flow. They've got free cash flow margins around 21%. They have strong free cash flow growth for the last three years, around 150%, I believe. This free cash flow has been used in buybacks, and the only issue that I have with with their free cash flow is most of the buybacks that they're doing is directly offsetting the high stock-based compensation that they have. They have high stock-based compensation, high dilution, and then in order to combat that, they buy back stock and it's really not affecting the total number of shares outstanding. Good numbers overall and free cash flow. After all, that is the theme of the show. But looking at the main theme of this business, what made PayPal significant is digital payments. They are definitely the leader in digital payments. They have the most market share.
