PayPal Holdings (PYPL -1.47%) is one of the original fintech companies; it's amassed a 435 million-account user base, offering digital payment processing, wallets, merchant services, and more.

The market PayPal trades in was challenging in 2022; many unprofitable and newer fintech stocks got hammered. While PayPal doesn't fit that description, the company's decline in earnings and worries over growth led to it being treated like those unprofitable fintechs -- the stock is down substantially from highs. But the sellers have gone too far; today, PayPal stock represents compelling value.

Below is an outline of what makes the stock worth considering for your portfolio today.

PayPal is taking its lumps along with the entire sector

The company had a tough year in 2022. Revenue grew 8%, its slowest pace in years, and non-GAAP (adjusted) earnings-per-share (EPS) declined 10% year over year to $4.13. Part of the soft performance was due to the company's long-anticipated full split with eBay, which stopped using PayPal to pay sellers last summer; excluding eBay, PayPal's revenue grew 12%.

Making matters worse is that vital operating metrics were soft, too; users grew just 2% in 2022, and total payment volume (TPV) increased by 9%. That's not terrible, but Wall Street didn't like the numbers because they're a drop-off from past performance. PayPal's TPV growth averaged 24% (28% excluding eBay) over the past five years. Active accounts grew from 305 million to 426 million between 2019 and 2021.

PYPL Chart.

PYPL data by YCharts.

The market can be overly jubilant during good times and trigger-happy during bad times; investors have pummeled shares for PayPal's off-year, underperforming the S&P 500 by a wide margin.

Have the sellers gone too far, though?

I'm not arguing that PayPal's share price decline isn't warranted, but I'll state my case that the punishment doesn't fit the crime. The stock's decline has depressed PayPal's valuation to a price-to-earnings ratio (P/E) of 36, against an average of nearly 51 over the prior decade.

However, this year, PayPal is expected to have a bounce-back campaign; the average EPS estimate is $4.89. That puts the stock at a forward P/E ratio of just over 15. Yes, you're waiting a year for PayPal's earnings to (potentially) grow to that figure, but that's a staggering 70% discount to the stock's long-term average.

PYPL PE Ratio Chart.

PYPL PE Ratio data by YCharts.

According to Morgan Stanley, consensus EPS estimates for the S&P 500 in 2023 are $228, a 4% increase over 2022. That prices the index at a forward P/E of just over 17. So you have the broader market fetching a higher valuation at potential 4% growth than an established company potentially growing 18%. That seems like a bit of a head-scratcher.

Can PayPal keep it up?

The rosy outlook for PayPal isn't limited to this year; current analyst estimates call for EPS growth averaging 17% over the next three to five years. Several factors could drive that growth. First, PayPal commonly spends cash flow on share repurchases; outstanding shares have declined more than 7% over the past decade.

Secondly, PayPal experienced some tailwinds from the pandemic when a surge in e-commerce created more payment volume. PayPal could resume growth now that COVID-19 tailwinds are largely gone and eBay stops impacting comparable growth figures. Additionally, digital payments are a growing trend as people move away from cash worldwide. The company's 435 million users (and growing) and $1.36 trillion in payment volume make it a leading fintech player that should benefit from the overall growth of its industry.

I always say that nothing is guaranteed in investing, so could PayPal surprise and fall on its face? Of course! But given the lashings investors have taken over the past year, the margin of safety the valuation provides should be juicy enough to put the stock on your radar.