StoneCo: A P/FCF of 1.1 — and Two Different Currencies

The reflex that skips the currency

Picture yourself at a market stall in Salvador da Bahia. The sign reads 50. For the blink of an eye your head does the sum in dollars, and the price feels outrageous. Only afterwards does the unit arrive: reais. Suddenly it is a bargain.

That is not stupidity, that is wiring. Our brains process the number first and the unit second. And that reflex is exactly why metric rankings are so seductive: they hand you the number and skip the unit.

For StoneCo the number is 1.1. That is the price-to-free-cash-flow ratio in our own ranking, measured on July 27, 2026. Translated, it would mean this: the entire company costs about as much on the stock market as it generates in free cash in a single year. For a growing, profitable business that would be an exclamation mark.

So the deal for this article is simple. We do not accept the number. First we check which currency each side of the division is in. Then we open the cash flow statement and look for the lines that actually produce this inflow. What remains at the end is still a low figure — just a very different one from 1.1.

What StoneCo actually does

Think of a bakery in Recife, a hair salon in Belo Horizonte, a kiosk in São Paulo. All three need the same three things: a device that lets customers pay by card or phone, an account where the money lands, and in a bad month a loan that covers the rent. Those three things are what StoneCo sells — from a single hand.

Legally the group is a Cayman Islands holding company based in George Town; the business sits entirely in Brazil. Around 16,367 people worked there as of December 31, 2025, of whom 3,743 were at the software subsidiary Linx, since sold. The Nasdaq listing dates from October 25, 2018; before that the same SEC registrant was called DLP Payments Holdings Ltd.

What matters for everything that follows is what the revenue is made of. In the first quarter of 2026 the split looked like this, all figures in millions of Brazilian reais:

• Financial income: R$2,582.2 million — 72.2 percent of all revenue. At heart this is interest: StoneCo advances merchants their card receipts before the card issuers pay, and charges for it. On top come the interest earnings of its own credit book.
• Other financial income: R$262.5 million — interest on its own cash.
• Net revenue from transaction activities: R$481.4 million — the classic per-swipe fee.
• Subscription services and equipment rental: R$251.8 million — the terminals themselves.

That is the first surprise for anyone who files StoneCo under "payment processor": almost three quarters of revenue is interest income. Economically StoneCo sits closer to a bank for micro-entrepreneurs than to a hardware vendor. Anyone thinking about this stock is thinking about a credit book, not about plastic boxes.

One more thing belongs at the very start, because it colors every figure that follows: the books are kept in Brazilian reais, the shares trade in U.S. dollars. The annual report says so in a single sentence.

"Unless otherwise indicated, we have translated real amounts into U.S. dollars using a rate of R$5.5024 to US$1.00, the commercial selling rate for U.S. dollars as of December 31, 2025 as reported by the Central Bank."

— StoneCo Ltd., Form 20-F for fiscal 2025, "Financial information in U.S. dollars"

A note on filing duties, because it comes up constantly below: the U.S. securities regulator, the SEC, treats StoneCo as a foreign private issuer. Such companies file an annual report on Form 20-F and report everything in between on Form 6-K. There is no quarterly report on Form 10-Q — the quarterly numbers arrive as exhibits to the 6-K filings. Searching for "StoneCo 10-Q" is a dead end.

How the stock landed on our desk

StoneCo did not reach our list through a headline but through a sort order. Our in-house stock scanner, the P/FCF ranking, collects every stock with positive free cash flow and a price-to-free-cash-flow ratio of at most 10 and sorts them ascending — the arithmetically cheapest first.

Here is the snapshot, measured on the live page on July 27, 2026 (list computed July 26, 2026):

• No. 20 in the U.S. selection at a displayed value of 1.1
• 544 stocks passed the criteria in the English list that day
• The page shows the 25 strongest rows per market selection

To repeat it yourself: open the "Stocks" section, choose "Scanner", pick the P/FCF ranking, set the market filter to the United States and look for the STNE row. These lists are recomputed daily. No. 20 is a dated snapshot from July 27, 2026, not a permanent state.

What does the metric even measure? Market value divided by free cash flow over the trailing four quarters. Free cash flow is what is left after all investment — in theory the money available for dividends, buybacks or debt reduction. A value of 10 means ten years of that inflow equal today's price. A value of 1.1 would mean a little over one year.

Now the first cross-check. The market value comes from market data and is denominated in U.S. dollars. The cash flow comes from the cash flow statement and is denominated in Brazilian reais. The division therefore mixes two currencies. Put both sides into the same currency — using the rate StoneCo names in its own annual report, R$4.965 per U.S. dollar as of April 22, 2026 — and roughly $2.6 billion of market value becomes about R$13.0 billion. Divided by the R$2,402.6 million of free cash flow across those four quarters, that is a ratio of roughly 5.4.

Remember the sentence: a ratio is only as good as the unit both of its sides stand in. A value of 5.4 is still low. But it is a different finding from 1.1 — and the gap is not an arithmetic error of this analysis, it is the difference between two currencies.

That does not settle the matter, though. The second question is what the denominator is made of. For a payment company with its own credit book that is anything but academic. That is where we go next.

One more framing point: a metric ranking is not a quality verdict. It sorts the universe by a single measure. Whether that measure delivers what it promises is decided by the annual report, not by the list. We ran the same check on another name from the same list — a consumer lender whose cash flow likewise comes out of a loan book: our analysis of Oportun Financial shows the same pattern in a different currency.

The numbers over the years — fairly credited

Let us start with what StoneCo genuinely does well. This company grows, and it earns money while doing it — three years running.

The detail, all from continuing operations and therefore excluding the divested software business. StoneCo recast 2023 and 2024 for that purpose, because Linx has counted as a discontinued operation since the second quarter of 2025 — both prior years are explicitly labeled "Recast" in the annual report:

• Total revenue and income: R$10,761.2 million (2023), R$12,049.6 million (2024), R$14,153.8 million (2025)
• Net income: R$1,554.6 million, R$2,020.6 million, R$2,377.1 million
• Basic earnings per share: R$4.96, R$6.68, R$8.85
• Total payment volume: R$438.3 billion, R$516.2 billion, R$560.9 billion
• Active payment clients: 3,522.1 thousand, 4,172.7 thousand, 4,803.5 thousand

What stands out is how much faster earnings per share climbed: up 78 percent in two years while net income rose 53 percent. The difference is not an accounting trick but share repurchases. In 2025 StoneCo bought back R$3.0 billion of its own stock and cut the share count by 40.3 million. Translated: your slice of the pie grows because the company takes slices out of circulation.

The balance sheet is no construction site either. As of March 31, 2026 total equity stood at R$12,282.7 million, and the company's own adjusted net cash figure — a non-IFRS measure that sets cash, short-term investments and receivables from card issuers against deposits and debt — came to R$4,939.1 million, up from R$2,588.1 million at year-end 2025. Return on equity was 18.6 percent in the first quarter of 2026.

And the growth has not stopped. The credit unit, discussed at length below, lifted its revenue from R$103.8 million to R$297.1 million within a year — up 186.2 percent. Instant-payment volume over Brazil's central bank standard Pix grew 37.3 percent to R$27.4 billion per quarter inside the payments business.

Now the other side of the same coin. It is uncomfortable, and it is more than one point.

What the filings say

Uncomfortable truth No. 1: free cash flow in fiscal 2025 was negative

The ranking says 1.1 years of free cash flow. The annual report says something else. For fiscal 2025 StoneCo reports operating cash inflow of R$676.6 million. Capital expenditure in the same year came to R$1,188.6 million — R$705.6 million on property and equipment and R$483.0 million on internally developed software. Subtract one from the other and what remains is a shortfall of about R$512 million.

The year before was worse: in 2024, operating activities consumed R$3,621.4 million. In 2023 they produced R$1,647.7 million. Three years, three completely different signs and magnitudes — for a business whose revenue grew steadily throughout.

How does that square with the value of 1.1? Simply: the ranking does not use the calendar year but the last four reported quarters. And that window contains an outlier.

The four quarters in the window: plus R$68.6 million (Q2 2025), minus R$1,319.3 million (Q3 2025), plus R$553.3 million (Q4 2025) and plus R$3,100.0 million (Q1 2026). That sums to R$2,402.6 million — and without the last quarter the sum would be negative. The entire hook of this analysis hangs on one three-month period.

Uncomfortable truth No. 2: that one quarter is a settlement effect

Look closer at the first quarter of 2026. Operating cash inflow was R$3,343.3 million per the interim report, against R$624.3 million a year earlier. Where does the jump come from? The cash flow statement names the lines:

• Accounts receivable from card issuers: plus R$3,901.1 million. The balance shrank from R$41,275.2 million to R$37,843.3 million, releasing cash.
• Accounts payable to clients: minus R$2,645.3 million. The counter-move.
• Interest income received, net of costs: plus R$1,890.8 million.
• Interest paid: minus R$427.5 million.

Without that single receivables line, operating cash flow for the quarter would have been negative. What appears here as cash flow is the movement of a settlement book: money that travels back and forth between card issuers, StoneCo and merchants anyway. It is not earned profit; it is a snapshot of the moment the quarterly clock stops.

None of this has to be inferred — StoneCo writes it into the annual report itself, and remarkably plainly:

"Sale of receivables: the sale of receivables results in the derecognition of our Accounts Receivable from Card Issuers. As a result, when a prepayment operation is funded through the true sale of receivables, both Accounts Receivable from Card Issuers and Accounts Payable to Clients are derecognized from our balance sheet in the same amount and the combined effect to our cash flows is a positive operational cash flow equivalent to our net fees earned by providing such prepayment service."

— StoneCo Ltd., Form 20-F for fiscal 2025, Item 5.B, note on the impact of different funding sources

Further down the same passage sits the mirror case: if StoneCo funds prepayment from its own capital, the receivables stay on the balance sheet, the payables disappear — and operating cash flow turns negative. Same business, same margin, opposite sign in the metric.

The takeaway: for a prepayment business, operating cash flow measures the funding choice, not the earnings power. Valuing StoneCo on cash flow means valuing a treasury decision.

Uncomfortable truth No. 3: the credit book grows faster than its quality

The most exciting story at StoneCo is also the riskiest. Since 2023 the group has been rebuilding its own credit book — working capital loans and credit cards for the very merchants whose card receipts it already sees. That is a strong argument: hardly anyone knows a kiosk's turnover better than the company that settles it.

The figures as of March 31, 2026 show both sides:

• Credit portfolio: R$3,224.9 million — up 122.5 percent within twelve months
• Credit revenue in the quarter: R$297.1 million — up 186.2 percent
• Average monthly interest rate: 3.3 percent, after 2.6 percent a year earlier
• Loan loss provisions in the quarter: R$166.3 million — up 389.2 percent
• Cost of risk: 21.9 percent, after 10.2 percent
• More than 90 days past due: 6.98 percent, after 4.57 percent
• 15 to 90 days past due: 4.97 percent, after 2.61 percent

Both delinquency ratios roughly doubled or rose by half within twelve months — in a portfolio that more than doubled in size at the same time. Young loans rarely default early; when the ratio rises despite heavy dilution from new lending, that is a serious signal. Management itself cites additional defaults among larger clients and "early signs of weaker performance in newer vintages".

The annual report is equally blunt on this point:

"As of December 31, 2025, our credit portfolio amounted to R$2,836 million with provisions for expected credit losses totaling R$389.7 million, compared with a credit portfolio of R$1,207.6 million and expected credit losses of R$144.5 as of December 31, 2024."

— StoneCo Ltd., Form 20-F for fiscal 2025, Item 3.D, credit risk factor

The effect is already visible in the income statement: adjusted gross margin fell from 44.4 percent in the first quarter of 2025 to 41.6 percent in the first quarter of 2026. Adjusted gross profit stagnated at R$1,487.8 million even though revenue rose 6.5 percent. The growth arrives, but it arrives at a higher price.

Uncomfortable truth No. 4: last quarter's headline number is not an operating result

Skim the interim report and you read basic earnings of R$7.17 per share, against R$1.83 a year earlier. That would be a quadrupling. Adjusted earnings for the same period, however, are R$2.19.

The difference is a one-time tax effect. Following an internal restructuring, StoneCo may amortize the goodwill from the Linx acquisition for tax purposes. Under IFRS the entire future benefit was recognized in the income statement at once:

"Income tax and social contribution was a gain of R$1,153.3 million. This can be explained by a non recurring gain of R$1,242.6 million from the recognition of Deferred Tax Assets related to the goodwill from the Linx acquisition."

— StoneCo Ltd., Form 6-K of May 14, 2026, 1Q26 earnings release

To be fair: StoneCo discloses the effect, strips it out of its adjusted figures and explains it in a dedicated table. Anyone reading only the headline has themselves to blame — but plenty of data vendors read exactly that headline. It is one reason why market data carry an earnings-per-share figure with little connection to the operating trend.

Uncomfortable truth No. 5: the priciest buyback tranche was the most recent one

Buybacks are not a side show at StoneCo but stated capital policy. Four programs have been completed since September 2023. The annual report prints the average prices:

• September 2023: 5,733,740 shares at $10.31
• November 2023: 13,202,939 shares at $13.52
• November 2024: 29,305,630 shares at $9.56
• May 2025: 21,871,991 shares at $16.34 ($357.3 million)

The most recently completed tranche was therefore by far the most expensive — some 71 percent above the average price of the preceding program. Buybacks only create value below intrinsic value; above it they redistribute from the holders who stay to the ones who sell. As a dated anchor for comparison: the closing price on July 24, 2026 was $10.76, and shareholders received a $2.53 per share extraordinary dividend on May 4, 2026.

The successor program of R$2.0 billion approved in December 2025 had not been drawn on as of December 31, 2025.

Valuation — same stock, two currencies

Start with the anchor, cleanly separated by currency. On July 24, 2026 the stock closed at $10.76. As of March 31, 2026 there were 229,177,062 Class A shares and 14,051,164 Class B shares outstanding, 243.2 million in total. That gives a market value of roughly $2.6 billion.

Now the other side, in reais: net income from continuing operations came to R$2,377.1 million in 2025. To compare the two, one side has to change currency. We take the rate StoneCo itself names — R$4.965 per U.S. dollar as of April 22, 2026 — and convert the market value into reais: about R$13.0 billion.

That produces the following, all figures in one currency:

• Price-to-earnings: roughly 5.5 (R$13.0 billion of market value against R$2,377.1 million of 2025 profit)
• Price-to-free-cash-flow: roughly 5.4 (against R$2,402.6 million over the trailing four quarters) — without answering whether that inflow recurs
• Price-to-sales: roughly 0.9 (against R$14,153.8 million of 2025 revenue)
• Price-to-book: roughly 1.1 (against R$12,282.7 million of equity as of March 31, 2026)

That is the honest order of magnitude: a single-digit price-to-earnings ratio and roughly book value. For a company that has raised revenue and profit three years running, that is not expensive. But it is also not the price tag the ranking displays.

Why does the market pay so little? There are two serious answers. The first is Brazil: the SELIC policy rate peaked at 15.0 percent on June 18, 2025 and stood at 14.75 percent at the date of the annual report on April 23, 2026. The real depreciated 21.8 percent in 2024 and appreciated 12.5 percent in 2025. Anyone accounting in dollars carries that swing without a single thing changing in the business.

The second answer is competition, and it comes from an unusual direction. The fiercest competitor is not a company but the Brazilian central bank: its free instant-payment standard Pix has become the preferred alternative to debit and prepaid cards since 2020. The annual report carries Pix as a standalone risk factor and notes that the extensions "Pix Parcelado" (installments) and "Pix Automático" (recurring payments) may put the credit card business under pressure too. Add Nubank, PagSeguro, Mercado Pago and the big banks — the filing calls the market "highly competitive" in as many words.

The professionals nonetheless take a friendly view: 14 analysts cover the stock, ten at the highest and three at the second-highest rating, one neutral. The average price target sits at roughly $16.09 (as of July 24, 2026). The currency rule applies here as well: the target is in dollars, the earnings behind it in reais, and between them sits an exchange rate no analyst steers.

To see how the same questions look at an established payment processor, the comparison is in our analysis of FIS — there the currency is uniform, but the question about the quality of cash flow is identical.

Opportunities and risks at a glance

What speaks for StoneCo

• Three consecutive years of rising revenue and profit from continuing operations: R$10,761.2 million to R$12,049.6 million to R$14,153.8 million of revenue, R$1,554.6 million to R$2,020.6 million to R$2,377.1 million of profit.
• Earnings per share growing faster than profit thanks to buybacks: R$4.96 to R$6.68 to R$8.85.
• Heavy capital returns: R$3.0 billion of repurchases in 2025 and a $2.53 per share extraordinary dividend on May 4, 2026.
• A focused business after the sale of Linx and SimplesVet — the group has reported as a single operating segment since the third quarter of 2025.
• Adjusted net cash of R$4,939.1 million as of March 31, 2026 and a return on equity of 18.6 percent in the first quarter of 2026.
• A lending business with a structural information advantage: StoneCo sees the card receipts of its own borrowers.

What speaks against it

• Free cash flow in fiscal 2025 was negative; the trailing twelve-month figure underpinning the ranking comes almost entirely from one quarter.
• Delinquency in the young credit book is rising fast: more than 90 days past due from 4.57 percent to 6.98 percent, cost of risk from 10.2 percent to 21.9 percent within twelve months.
• Adjusted gross margin fell from 44.4 percent to 41.6 percent; adjusted gross profit is flat despite revenue growth.
• Total payment volume grew only 2.7 percent in the first quarter of 2026 and card volume actually shrank 3.3 percent. The active client base fell 4.8 percent from the previous quarter.
• Pix is a free competitor operated by the central bank that no company can undercut — and it is pushing into credit card territory with installments and recurring payments.
• Currency and rate risk: the books are in reais, the shares trade in dollars. Any metric mixing the two is misleading, the ranking included.
• Two share classes: André Street holds 100 percent of the Class B shares and therefore 39.45 percent of the voting power on 7.97 percent of the equity (as of March 31, 2026).

A human conclusion

Back to the market stall in Salvador. The sign said 50 — and the question was never whether 50 is a lot or a little. The question was: 50 what?

For StoneCo the ranking says 1.1. The honest answer is roughly 5.4, as soon as both sides of the division stand in the same currency. And even that 5.4 rests on a quarter in which a settlement book drained, not on a year in which money was earned. Across full-year 2025, nothing was left after investment.

That does not make StoneCo a bad company — quite the opposite. Here a profitable business is growing with a genuine advantage over any bank: whoever settles a merchant's till knows before anyone else whether that merchant can repay a loan. StoneCo is expanding exactly that advantage, aggressively. Whether it works out will not be decided by a ranking but by one line in the next interim report: the share of loans more than 90 days past due. It last stood at 6.98 percent and has risen four quarters in a row.

Nothing in this article was hidden by the company. It was all in the filings — the currency rule on page 1, the cash flow mechanics in the management discussion, the delinquency ratios in the quarterly table. What was missing was the unit behind the number.

What you make of that is your decision. And that is exactly as it should be.

Sources

• Form 20-F for fiscal year 2025, StoneCo Ltd., CIK 0001745431, filed April 23, 2026 (Item 3.A selected financial data, Item 3.D risk factors, Item 5.B liquidity and cash flows, Item 6.D employees, Item 7.A major shareholders, Item 16E issuer purchases of equity securities)
• Form 6-K of May 14, 2026, earnings release for the first quarter of 2026 (latest periodic report) — metrics, credit tables, cash flow statement, balance sheet and the IFRS-to-adjusted reconciliation
• Form 6-K of April 14, 2026 — extraordinary dividend of $2.53 per share, roughly R$3.08 billion, paid May 4, 2026
• Form 6-K of February 27, 2026 — closing of the Linx sale after CADE clearance on February 20, 2026
• Form 6-K of January 7, 2026 — leadership change: Mateus Scherer becomes CEO from March 2026, Pedro Zinner moves to the board
• Form 6-K of December 22, 2025 — completion of the R$3 billion excess capital distribution and a new R$2 billion repurchase program
• Form 6-K of July 22, 2025 — announcement of the Linx sale to TOTVS (enterprise value R$3.05 billion plus net cash) and of SimplesVet to PetLove
• Screening and valuation data: our in-house stock scanner and fundamental data (as of July 24, 2026), including the P/FCF ranking — measured ourselves on July 27, 2026: 544 hits in the English list, 25 rows shown with the U.S. market filter, No. 20 among them at a ratio of 1.1; the list had last been computed on July 26, 2026

Journalistic analysis, not investment advice and not a solicitation to buy or sell securities. Stocks can go to zero; emerging market stocks carry additional currency and political risk. All business figures come from the SEC filings named above and are denominated in Brazilian reais, while all price and market-value figures are in U.S. dollars. The author holds no position in StoneCo Ltd. at the time of publication.