What happened
Shares of StoneCo (STNE 0.26%) are making big gains in Friday's trading. The fintech stock was up roughly 8.1% as of 11:40 a.m. ET following the company's recent first-quarter earnings release.
StoneCo published Q1 results after the market closed on Thursday, posting a performance that came in above the market's expectations. The company recorded non-GAAP (adjusted) earnings per share of 0.43 Brazilian reals on revenue of 2.07 billion reals, and its forward guidance was also significantly better than anticipated.
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So what
StoneCo's revenue surged 138.6% year over year in the first quarter, and its net income margin for the period came in at 6.4% -- up from the 1.8% net margin it posted in the fourth quarter. With strong sales growth and margin improvement, the company's adjusted earnings before taxes, interest, depreciation, and amortization (EBITDA) rose 116.8% year over year and 19.4% on a sequential basis.
Now what
StoneCo is guiding for second-quarter sales to come in between 2.15 billion reals and 2.2 billion reals, suggesting growth of 151% year over year at the midpoint of the target. Adjusted earnings before taxes are projected to come in above 185 million reals in the period, representing a 13.4% increase on a sequential basis.
StoneCo has struggled with high levels of inflation in Brazil and regulatory changes that have negatively impacted the company's credit business. On the other hand, the company's payment-processing business has continued to grow at an encouraging rate, and the recent Q1 report and forward guidance points to the business being able to turn things around over the long term. With the stock trading down roughly 88% from the lifetime high it hit early last year, StoneCo stock looks like a worthwhile buy at current prices.
