PagSeguro Digital Ltd (PAGS) is approaching a resistance level, and if surpassed the stock could breakout.
PAGS is a Brazilian-based company which acts as a provider of financial technology solutions focused primarily on Micro-Merchants, Small Companies, and Medium-Sized Companies, in Brazil. The company provides a range of solutions and tools such as cash-in and cash-out options and provides access to working capital and to help to manage their cash flow.
The company had a strong third quarter, with earnings up 233.3% year over year. PAGS is seeing positive trends in terms of engagement, new clients added, and electronic payments volumes. The company also reached their all-time high absolute TPV, and historical records in net new additions for both merchants and Pagbank users.
PAGS had $450 million in cash as of the end of the quarter, which was down from the previous quarter, but up year over year. It has a current ratio of 1.9, indicating it has enough liquidity to handle short-term obligations. The company also has a solid profit margin of 21.2%.
Growth looks strong for next year as revenue is expected to grow by 33.8% and earnings are expected to rise 53.8%. PAGS stock looks overvalued through, with a P/E of 73 and a Price to Sales of 15.4.
Its stock has shown bullish momentum over the near, mid, and long-term. This has led to a “Strong Buy” rating in our POWR Ratings system and a grade of “A” for Trade Grade and Buy & Hold Grade. This is reflected in its chart below.
Take a look at the 1-year chart of PAGS below with the added notations:
Since the beginning of November, PAGS has been climbing, hitting new highs along the way. While doing so, the stock has faced resistance at $45, $50, and now $55, creating what looks like a staircase on the chart. If PAGS can break through $55, the stock should take another leg up, as it did when it broke above $45 and $50.
PAGS has key levels at $5 increments. A trader could enter a long position on a break above $55.
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PAGS shares were trading at $54.99 per share on Tuesday morning, up $0.37 (+0.68%). Year-to-date, PAGS has gained 60.98%, versus a 18.22% rise in the benchmark S&P 500 index during the same period.
About the Author: Christian Tharp, CMT
Christian is an expert stock market coach at the Adam Mesh Trading Group who has mentored more than 4,000 traders and investors. He is a professional technical analyst that is a certified Chartered Market Technician (CMT), which is a designation awarded by the CMT Association. Christian is also the author of the daily online newsletter Todays Big Stock.
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