When it comes to electronic payments, it's hard to deny PayPal's (PYPL 1.56%) position in the industry. It has been a trusted name in the space for more than two decades. 

However, slowing growth amid macro uncertainty has resulted in a more pessimistic tone. Shares of this leading fintech enterprise are currently 83% below their peak price. Perhaps this is a potential investment opportunity. 

But before buying the stock, there are four things the smartest investors know about PayPal. 

Important business drivers 

PayPal processed $1.36 trillion in total payment volume (TPV) in 2022, and it currently has 431 million active accounts. This signifies its huge scale, but there are a lot of different parts to the business that are worth understanding. 

Investors are probably most familiar with the PayPal button, which is called branded checkout. I'm sure many readers have found themselves using this option when buying something online. In 2022, it represented 30% of overall TPV.

Braintree, acquired in 2013 for $800 million, is PayPal's unbranded checkout service that focuses on serving merchants. While its margins are typically lower than branded checkout, it is growing faster. And in 2022, Braintree's TPV of roughly $400 billion was on par with branded checkout. 

We can't forget about Venmo, the popular peer-to-peer payments service that handled $245 billion of TPV last year. Management is focused on finding ways to monetize this platform. A key part of this is increasing the number of users who sign up for a Venmo debit or credit card. 

Strong financial position 

The stock's huge fall would distract you from just how profitable PayPal is. It posted a non-GAAP operating margin of 21.4% last quarter (second-quarter 2023 ended June 30). And in the last 12 months, the company generated $3.7 billion of free cash flow. That's encouraging for investors in the fintech space, where many businesses are far from hitting positive earnings. 

This excess cash is used to aggressively buy back stock. In just the last four quarters, PayPal's outstanding share count has been reduced by 4%. Existing investors stand to gain with higher per-share earnings that can help propel the stock price. 

The reason why PayPal is in such a strong financial position has to do with its business model. Now that the technological infrastructure is largely built out, its capital expenditures aren't too high. This scaled operation results in notable profits. 

Competition is intense 

To say that PayPal faces some serious competition in the payments space would be putting it lightly. Braintree competes with the likes of Adyen and privately held Stripe, which both have found tremendous success and adoption from merchants across the globe. Plus, there are e-commerce platforms like Shopify and Wix that might overlap with some of the services that Braintree offers. 

When it comes to the consumer-facing side of the equation, competition might be even more stiff. Block's Cash App goes head-to-head with both PayPal's branded digital wallet, and with Venmo. Cash App's gross profit of $3 billion in 2022 far exceeded Venmo's estimated revenue total of $935 million last year. That's a clear sign that Cash App is doing much better at monetizing its platform. 

PayPal also has to go up against dominant tech firms like Apple and Alphabet. These companies are in an advantageous position because they not only offer popular digital wallets, they also control the two most powerful smartphone operating systems. 

Low valuation 

With the stock being 83% below its peak price right now, bullish investors have the opportunity to buy PayPal at a trailing price-to-earnings (P/E) ratio of just 15. This is the cheapest that shares have ever sold for since the business was spun off from eBay in 2015. I see that as a major bargain. 

In fact, since that spin-off, PayPal stock's average P/E multiple was a whopping 49. It's safe to say that investors have completely soured on this fintech company, probably due to slower growth.

There's a lot to unpack with PayPal. After learning about these four factors, investors are now better equipped to make a smarter decision about the stock.