Distribution and merchant relationships can support recurring payments and financial-service earnings. The low market multiple offers potential value, but Q2 continuing-operations revenue grew only 2.5% and credit provisions affected margins. The investment requires disciplined underwriting and capital allocation; low P/E alone does not compensate automatically for governance, FX and credit risk.

What the Market May Be Mispricing

Debate	Research judgment
Merchant payments growth and funding economics	Distribution and merchant relationships can support recurring payments and financial-service earnings.
Credit losses and capital requirements	Merchant retention, take rates, funding spreads, credit losses and risk-adjusted return on capital drive value.
Governance, FX and capital returns	Q2 revenue and income from continuing operations were R$3.587 billion.

Stone provides payment acceptance, merchant banking and credit products in Brazil, focused on small and midsize businesses. Revenue combines processing, financial income and related services. Merchant advances, settlement obligations, deposits and lending create a balance sheet that cannot be analyzed like a simple software company. Business disposals and changes in reporting scope require continuing-operations comparisons.

Business Takeaway

Stone provides payment acceptance, merchant banking and credit products in Brazil, focused on small and midsize businesses. Merchant retention, take rates, funding spreads, credit losses and risk-adjusted return on capital drive value.

Brazil's digital payments and merchant banking remain substantial markets with intense competition from bank acquirers, digital banks and fintechs. Lower funding costs can help, while rate changes and merchant credit quality can reverse that benefit. Payment volume and credit exposure are different sources of risk.

Market-Share Analysis

Comparable same-definition share data for the subject and its principal rivals were not established. TAM estimates and company-specific volume measures are not treated as directly comparable market shares. The positioning analysis below is more reliable than a table of unmatched percentages.

Competitive Scale / Position

Company / Platform	Primary Position	Relative Scale	Growth Direction	Investment Relevance
PagBank (PAGS)	Direct: Brazilian acquiring and merchant banking	Product scope; no matched operating-scale series	Competes for Brazilian merchant relationships	Customer choice in the stated segment only
Cielo; Rede; Getnet	Direct: Brazilian merchant acquiring	Product scope; no matched operating-scale series	Competes on acquiring price and service	Customer choice in the stated segment only
Mercado Pago	Direct segment: Brazilian merchant payments and accounts	Product scope; no matched operating-scale series	Competes for merchant transaction flows	Customer choice in the stated segment only

Industry Takeaway

Payment volume and credit exposure are different sources of risk. The base case requires evidence of profitable adoption within that market.

Competitive Landscape

Domestic merchant acquiring and banking define Stone’s core set. dLocal’s global cross-border merchant model and Nubank’s broader consumer bank are excluded as like-for-like peers.

Competitor	Market Share	Positioning	Advantages vs. Company	Disadvantages vs. Company	Current Direction
PagBank (PAGS)	No consistent comparable series	Direct: Brazilian acquiring and merchant banking	Integrated merchant payments and account offering	Different merchant mix and credit exposure	Competes for Brazilian merchant relationships
Cielo; Rede; Getnet	No consistent comparable series	Direct: Brazilian merchant acquiring	Bank-linked merchant distribution	Different service and merchant-segment economics	Competes on acquiring price and service
Mercado Pago	No consistent comparable series	Direct segment: Brazilian merchant payments and accounts	Commerce ecosystem and merchant distribution	Not equivalent to all Stone SMB credit exposures	Competes for merchant transaction flows

Moat Assessment

Local distribution, service and integrated merchant relationships create a moderate advantage. Competition remains strong and customers can move among providers. Underwriting performance and service quality determine whether the relationship becomes durable.

Moat direction: Stable — an analytical judgment about product and distribution economics, not a measured market-share claim.

Competitive Takeaway

Local distribution, service and integrated merchant relationships create a moderate advantage. The direct rivals determine commercial pressure; diversified or sector anchors provide valuation context and are not substitutes for direct competition.

Historical Financials

Standardized period history (reviewed 2026-11-07): Completed issuer fiscal years only, plus actually disclosed standalone quarters and cumulative YTD for the latest open FY. Currency BRL, flows in millions, with fiscal dates defined by the issuer. Values marked derived come from disclosed period differences/sums, not TTM. Missing = N/D (not zero). Q1/Q2/1H revenue uses continuing operations after divestitures, whereas the historical annual figures use earlier standardized classifications; growth and margins are not directly comparable. Current quarter FCF is consolidated CFO less property/equipment and purchased/developed intangible costs; merchant settlement and credit cashflows make this an unreliable owner-cash proxy.

Period	Revenue	Growth	Gross Margin	Operating Margin	FCF	FCF Margin	SBC	Diluted Shares	Cash	Debt
FY2024	11,551	14.47%	75.48%	48.89%	-3,746	-32.43%	232.67	308	5,746	12,896
FY2025	13,400	16.00%	74.88%	48.64%	556.7	4.15%	297.02	273	5,941	17,582
Q1 FY2026	3,578M	N/D	N/D	N/D	3,060.8M	85.5%	111.3M	N/D	N/D	N/D
Q2 FY2026	3,587.4M	N/D	N/D	N/D	1,446.4M	40.3%	59.2M	N/D	N/D	N/D
H1 FY2026	7,165.4M (derived from disclosed periods)	N/D	N/D	N/D	4,507.2M (derived from disclosed periods)	62.9%	170.5M (derived from disclosed periods)	N/D	N/D	N/D

Financial Takeaways

Q2 revenue and income from continuing operations were R$3.587 billion. Management-defined adjusted gross margin was 43.6%, with credit provisions offsetting some funding improvements. Provider-standardized margins use different classifications and should not be mixed with this definition. The model values sustainable USD EPS after credit costs and compensation, with a higher discount rate for Brazil, FX and governance risk.

The historical series is standardized BRL and differs from management’s continuing-operations revenue and adjusted profit. Forecast EPS is USD per listed share, with BRL5.25/USD assumed. Settlement cash, credit funding and discontinued operations make unadjusted industrial EV/FCF misleading.

Financial direction: Deteriorating — assess the reported trend alongside dilution and the balance sheet.

Current Valuation

Metric	Value
Price Snapshot	$7.39 — 2026-11-03 regular-session close, America/New_York
Market Capitalization	$2.78B
Enterprise Value	N/A — not used; see capital/settlement accounting discussion
Trailing P/E	4.80
Provider forward P/E	5.43
EV / Sales	N/A — unadjusted metric excluded

Comparable Company Analysis

Company	Relevance	Public / Private	Forward P/E	EV / Sales	Growth / Margin / Risk Context
STNE — StoneCo Ltd.	Subject company	Public	5.43	N/A — financial / share-class mismatch	Brazilian merchant payments and banking; 3Y revenue-growth estimate 7.01%; operating margin 45.67%
Brazilian incumbent bank acquirers	Direct operating competitor / substitute	Operating businesses within listed banks	N/A	N/A	merchant acquiring and credit distribution; no compatible standalone public multiple used
PAGS — PagSeguro/PagBank	Direct Brazilian merchant acquiring/banking comparator	Public	6.36	0.86	Brazilian acquiring and merchant banking; 3Y revenue-growth estimate 3.78%; operating margin 37.76%
Cielo; Rede; Getnet	Direct: Brazilian merchant acquiring	Mixed / standalone valuation not used	N/D — no matched snapshot collected	N/D — no matched snapshot collected	Competes on acquiring price and service
Mercado Pago	Direct segment: Brazilian merchant payments and accounts	Operating product / listed parent	N/D — no matched snapshot collected	N/D — no matched snapshot collected	Competes for merchant transaction flows

Comparable takeaway: Domestic merchant acquiring and banking define Stone’s core set. dLocal’s global cross-border merchant model and Nubank’s broader consumer bank are excluded as like-for-like peers. Quoted multiples retain their original dated snapshot; missing matched multiples are not estimated. Consolidated parent multiples do not isolate the competing product. No mechanical peer average is used.

The base terminal P/E is 10×, versus the provider's current forward P/E of 5.43×. Holding that quoted multiple constant on this model's 2029 EPS gives an illustrative present value of $9.49, versus the central base FV of $17.48. Earnings definitions differ, so this is a sensitivity check; it makes the dependence on a rerating or derating explicit.

Valuation Scenarios

Scenario	Key Assumptions	Fair Value	Probability	Probability Rationale	Return From Price Snapshot
Bear	3Y revenue CAGR 0%; sustainable 2029 EPS $1.20 after compensation; 6× P/E; 17% discount rate; Credit and FX pressure limit 2029 USD EPS to $1.20.	$4.50	30%	Execution, financing or competitive setbacks remain credible	-39.1%
Base	3Y revenue CAGR 10%; sustainable 2029 EPS $2.80 after compensation; 10× P/E; 17% discount rate; Stable merchant economics and disciplined capital returns produce $2.80 of 2029 USD EPS.	$17.48	50%	Most likely operating trajectory, requiring measurable progress	+136.5%
Bull	3Y revenue CAGR 18%; sustainable 2029 EPS $4.00 after compensation; 13× P/E; 17% discount rate; Successful cross-sell and controlled credit losses produce $4 of 2029 USD EPS.	$32.47	20%	Successful product conversion and operating leverage; not assured	+339.4%
Probability-Weighted	Sum of each scenario value × its probability	$16.58	100%	Judgmental scenario probabilities	+124.4%

Valuation Takeaway

• Primary valuation method: Present value of sustainable 2029 equity earnings × scenario P/E, plus assumed interim dividends. The three-year discount horizon approximates late-2029 earning power.
• Cross-check methods: Direct competition, quoted peer multiples, current cash conversion, and the separate revenue/share/net-margin bridge in the valuation workpaper.
• Key valuation dependencies: Merchant payments growth and funding economics; Credit losses and capital requirements; Governance, FX and capital returns. All forward figures are independent research assumptions, not company guidance or consensus.
• Valuation confidence / Risk Level: 41/100 / High. Scenario values are sensitive to sustainable earnings and terminal multiples.
• Margin-of-safety conclusion: Buy at $12.07. New-file boundaries use Strong Buy = min(P/W FV ÷ 1.5, 1.1 × bear FV), Buy upper = P/W FV ÷ 1.25, Avoid above = P/W FV ÷ 0.90. Returns are to present fair value, not annualized returns or price targets for a particular date.

Capital returns can create value at a low multiple if supported by durable earnings and adequate capital. Monitor governance, disposal proceeds, buyback pricing and credit discipline. Past credit problems make realized loss experience more important than optimistic portfolio growth targets.

Management Takeaway

Past credit problems make realized loss experience more important than optimistic portfolio growth targets.

Analyzed call: Q2 2026, complete material Q&A · Research snapshot: 2026-10-21

The table consolidates related questions and follow-ups from each material participant in the complete call.

Analyst / Firm	Core Question	Management Response	Research Read-Through
Eric Ito / Bradesco BBI	What drives allowances and the credit-loss outlook?	Management said losses are elevated and normalization is expected later.	Treat the stated timetable as conditional on demonstrated execution.
Daniel Vaz / Safra	What is needed to achieve full-year guidance?	Management said second-half transaction acceleration is required.	Treat the stated timetable as conditional on demonstrated execution.
Antonio Ruette / BofA	How do large borrower defaults affect reported delinquency?	Management said concentrated exposures affect the reported figures.	Confirm that this opportunity converts into profitable recurring demand.
Neha Agarwala / HSBC	How are Ton and SMB customer economics assessed?	Management said it evaluates the whole customer relationship.	Confirm that this opportunity converts into profitable recurring demand.
Arnon Shirazi / Citi	How quickly can communication and service problems affecting churn be fixed?	Management said service fixes need time.	Confirm that this opportunity converts into profitable recurring demand.
Renato Meloni / Autonomous Research	What affects quarterly transaction-revenue comparisons?	Management said quarterly incentives affect the comparison.	Confirm that this opportunity converts into profitable recurring demand.
Pedro Leduc / Itaú BBA	How do deposits affect funding costs as assets grow?	Management said deposits help, but asset growth may outpace them.	Require durable cash conversion after compensation and ongoing investment.
Guilherme Grespan / JPMorgan	How do government lending guarantees affect credit risk and provisions?	Management said guarantees change risk without eliminating all provisions.	Confirm that this opportunity converts into profitable recurring demand.
Kaio Prato / UBS	How do credit and POS accounting changes affect balance-sheet comparisons?	Management said reclassifications distort the comparisons.	Confirm that this opportunity converts into profitable recurring demand.

Analyst-Q&A Takeaway

Credit allowances and customer churn are material challenges; management expects improvement rather than demonstrating it. Guarantees and accounting reclassifications do not eliminate underwriting risk or the need for stronger transaction growth.

Source	Type	Date / Period	What It Supports
www.sec.gov	Company IR / earnings filing	Q2 2026	Latest operating results, guidance, products and financial supplement
STNE complete earnings-call transcript	Transcript	Q2 2026	Prepared remarks and all material Q&A exchanges
STNE regular-session historical price	Market data	2026-10-20 close	Common price used in returns, scores and zones
STNE valuation statistics	Market data	2026-10-20 close; ratios retrieved 2026-10-21	Market capitalization, shares, quoted multiples and current ratios
STNE historical income statement	Standardized financial statements	Latest reported period and two preceding fiscal years	Historical income statement; source-native currency and definitions
STNE historical balance sheet	Standardized financial statements	Latest reported period and two preceding fiscal years	Historical balance sheet; source-native currency and definitions
STNE historical cash flows	Standardized financial statements	Latest reported period and two preceding fiscal years	Historical cash flows; source-native currency and definitions
PagSeguro/PagBank statistics	Comparable-company market data	2026-10-20 regular close	Peer multiples and financial context; public quote basis

Research context

• Company: StoneCo Ltd.

• Ticker: STNE

• Exchange: Nasdaq

• Sector / Industry: Financials / Brazilian merchant payments and banking

• Template version: 2.7

• Research date: 2026-10-21

• Valuation / score price snapshot: $7.39 — 2026-11-03 regular-session close, America/New_York

• Tracking tier: On the Radar

• Owned: Yes

• Primary operating period reviewed: Q2 2026

• Historical period reviewed: completed FY2024-FY2025; Q1 FY2026, Q2 FY2026, H1 FY2026

• Latest investor presentation reviewed: Results release and associated financial tables; no separate slide deck materially used

• Latest earnings call reviewed: Q2 2026, complete material Q&A

• Latest post-earnings management commentary reviewed: No separate later management presentation incorporated

• Price snapshot date: 2026-11-03

• Price snapshot time / timezone: Regular-session close, America/New_York (including exchange half-days)

• Competitor / analyst-Q&A audit: 2026-10-28; original operating, price and valuation snapshots retained.

STNE — StoneCo Ltd.

Company & Research Metadata

• Company: StoneCo Ltd.

• Ticker: STNE

• Exchange: Nasdaq

• Sector / Industry: Financials / Brazilian merchant payments and banking

• Template version: 2.7

• Research date: 2026-10-21

• Valuation / score price snapshot: $7.39 — 2026-11-03 regular-session close, America/New_York

• Tracking tier: On the Radar

• Owned: Yes

• Primary operating period reviewed: Q2 2026

• Historical period reviewed: completed FY2024-FY2025; Q1 FY2026, Q2 FY2026, H1 FY2026

• Latest investor presentation reviewed: Results release and associated financial tables; no separate slide deck materially used

• Latest earnings call reviewed: Q2 2026, complete material Q&A

• Latest post-earnings management commentary reviewed: No separate later management presentation incorporated

• Price snapshot date: 2026-11-03

• Price snapshot time / timezone: Regular-session close, America/New_York (including exchange half-days)

• Competitor / analyst-Q&A audit: 2026-10-28; original operating, price and valuation snapshots retained.

What's Changed Since Previous Review

Current Review: 2026-10-28

Previous Review: 2026-10-21

Update Trigger: Competitor relevance and analyst-Q&A correction

Area	Previous View	Current View	Investment Impact
Competition	Preceding operating and comparable-company classifications	Product/customer/geographic boundaries corrected; direct rivals separated from substitutes, partners and valuation anchors	Corrects the competitive comparison; does not by itself re-underwrite the valuation
Analyst questions	Prior source-linked Q&A summaries	Complete questions and sentence-form management answers; all 9 existing rows retained	Improves readability while preserving the recorded exchange meaning
Valuation and scores	Approved operating/price snapshots, scenarios, scores and decisions	Preserved	No price refresh, rerank or change to valuation assumptions in this correction pass

Thesis: No new fundamental thesis determination is made in this correction pass. The prior investment decision is preserved; the corrected competitive scope should govern the next substantive review.

Investment Snapshot

Metric	Current View
Price Snapshot	$7.39 — 2026-11-03 regular-session close, America/New_York
Rating / Zone Status	Buy
Bear / Base / Bull Fair Value	$4.50 / $17.48 / $32.47
Scenario Probabilities	30% / 50% / 20%
Probability-Weighted Fair Value	$16.58
Probability-Weighted Expected Return	+124.4%
Bear-Case Return	-39.1%
Strong Buy Zone	≤ $4.95
Buy Zone	>$4.95–$13.26
Avoid Chasing Above	> $18.42
Quality Score / Tier	65.1 / Tier B
Opportunity Score / Rank	62.9 / #20 of 76
Risk Level	High
Tracking / Ownership	On the Radar / Owned

Decision rationale: STNE is Buy at $12.07, with +37.4% probability-weighted upside and -62.7% bear-case return. Distribution and merchant relationships can support recurring payments and financial-service earnings. Confidence is 41/100 because the earnings conversion, competitive and capital assumptions below remain conditional.

Investment Thesis

Distribution and merchant relationships can support recurring payments and financial-service earnings. The low market multiple offers potential value, but Q2 continuing-operations revenue grew only 2.5% and credit provisions affected margins. The investment requires disciplined underwriting and capital allocation; low P/E alone does not compensate automatically for governance, FX and credit risk.

What the Market May Be Mispricing

Debate	Research judgment
Merchant payments growth and funding economics	Distribution and merchant relationships can support recurring payments and financial-service earnings.
Credit losses and capital requirements	Merchant retention, take rates, funding spreads, credit losses and risk-adjusted return on capital drive value.
Governance, FX and capital returns	Q2 revenue and income from continuing operations were R$3.587 billion.

Business Overview

Stone provides payment acceptance, merchant banking and credit products in Brazil, focused on small and midsize businesses. Revenue combines processing, financial income and related services. Merchant advances, settlement obligations, deposits and lending create a balance sheet that cannot be analyzed like a simple software company. Business disposals and changes in reporting scope require continuing-operations comparisons.

Business Takeaway

Stone provides payment acceptance, merchant banking and credit products in Brazil, focused on small and midsize businesses. Merchant retention, take rates, funding spreads, credit losses and risk-adjusted return on capital drive value.

Industry, TAM & Market Share

Brazil's digital payments and merchant banking remain substantial markets with intense competition from bank acquirers, digital banks and fintechs. Lower funding costs can help, while rate changes and merchant credit quality can reverse that benefit. Payment volume and credit exposure are different sources of risk.

Market-Share Analysis

Comparable same-definition share data for the subject and its principal rivals were not established. TAM estimates and company-specific volume measures are not treated as directly comparable market shares. The positioning analysis below is more reliable than a table of unmatched percentages.

Competitive Scale / Position

Company / Platform	Primary Position	Relative Scale	Growth Direction	Investment Relevance
PagBank (PAGS)	Direct: Brazilian acquiring and merchant banking	Product scope; no matched operating-scale series	Competes for Brazilian merchant relationships	Customer choice in the stated segment only
Cielo; Rede; Getnet	Direct: Brazilian merchant acquiring	Product scope; no matched operating-scale series	Competes on acquiring price and service	Customer choice in the stated segment only
Mercado Pago	Direct segment: Brazilian merchant payments and accounts	Product scope; no matched operating-scale series	Competes for merchant transaction flows	Customer choice in the stated segment only

Industry Takeaway

Payment volume and credit exposure are different sources of risk. The base case requires evidence of profitable adoption within that market.

Customer Economics

Merchant retention, take rates, funding spreads, credit losses and risk-adjusted return on capital drive value. Cross-selling credit can deepen relationships while increasing losses and capital needs. Settlement cash and loan sales can distort standardized FCF, making recurring common-holder earnings the better valuation anchor.

Customer-Economics Takeaway

The economic test is Governance, FX and capital returns. Settlement cash and loan sales can distort standardized FCF, making recurring common-holder earnings the better valuation anchor.

Competitive Landscape & Moat

Competitive Landscape

Domestic merchant acquiring and banking define Stone’s core set. dLocal’s global cross-border merchant model and Nubank’s broader consumer bank are excluded as like-for-like peers.

Competitor	Market Share	Positioning	Advantages vs. Company	Disadvantages vs. Company	Current Direction
PagBank (PAGS)	No consistent comparable series	Direct: Brazilian acquiring and merchant banking	Integrated merchant payments and account offering	Different merchant mix and credit exposure	Competes for Brazilian merchant relationships
Cielo; Rede; Getnet	No consistent comparable series	Direct: Brazilian merchant acquiring	Bank-linked merchant distribution	Different service and merchant-segment economics	Competes on acquiring price and service
Mercado Pago	No consistent comparable series	Direct segment: Brazilian merchant payments and accounts	Commerce ecosystem and merchant distribution	Not equivalent to all Stone SMB credit exposures	Competes for merchant transaction flows

Moat Assessment

Local distribution, service and integrated merchant relationships create a moderate advantage. Competition remains strong and customers can move among providers. Underwriting performance and service quality determine whether the relationship becomes durable.

Moat direction: Stable — an analytical judgment about product and distribution economics, not a measured market-share claim.

Competitive Takeaway

Local distribution, service and integrated merchant relationships create a moderate advantage. The direct rivals determine commercial pressure; diversified or sector anchors provide valuation context and are not substitutes for direct competition.

Financial Profile

Historical Financials

Standardized period history (reviewed 2026-11-07): Completed issuer fiscal years only, plus actually disclosed standalone quarters and cumulative YTD for the latest open FY. Currency BRL, flows in millions, with fiscal dates defined by the issuer. Values marked derived come from disclosed period differences/sums, not TTM. Missing = N/D (not zero). Q1/Q2/1H revenue uses continuing operations after divestitures, whereas the historical annual figures use earlier standardized classifications; growth and margins are not directly comparable. Current quarter FCF is consolidated CFO less property/equipment and purchased/developed intangible costs; merchant settlement and credit cashflows make this an unreliable owner-cash proxy.

Period	Revenue	Growth	Gross Margin	Operating Margin	FCF	FCF Margin	SBC	Diluted Shares	Cash	Debt
FY2024	11,551	14.47%	75.48%	48.89%	-3,746	-32.43%	232.67	308	5,746	12,896
FY2025	13,400	16.00%	74.88%	48.64%	556.7	4.15%	297.02	273	5,941	17,582
Q1 FY2026	3,578M	N/D	N/D	N/D	3,060.8M	85.5%	111.3M	N/D	N/D	N/D
Q2 FY2026	3,587.4M	N/D	N/D	N/D	1,446.4M	40.3%	59.2M	N/D	N/D	N/D
H1 FY2026	7,165.4M (derived from disclosed periods)	N/D	N/D	N/D	4,507.2M (derived from disclosed periods)	62.9%	170.5M (derived from disclosed periods)	N/D	N/D	N/D

Financial Takeaways

Q2 revenue and income from continuing operations were R$3.587 billion. Management-defined adjusted gross margin was 43.6%, with credit provisions offsetting some funding improvements. Provider-standardized margins use different classifications and should not be mixed with this definition. The model values sustainable USD EPS after credit costs and compensation, with a higher discount rate for Brazil, FX and governance risk.

The historical series is standardized BRL and differs from management’s continuing-operations revenue and adjusted profit. Forecast EPS is USD per listed share, with BRL5.25/USD assumed. Settlement cash, credit funding and discontinued operations make unadjusted industrial EV/FCF misleading.

Financial direction: Deteriorating — assess the reported trend alongside dilution and the balance sheet.

Management & Capital Allocation

Capital returns can create value at a low multiple if supported by durable earnings and adequate capital. Monitor governance, disposal proceeds, buyback pricing and credit discipline. Past credit problems make realized loss experience more important than optimistic portfolio growth targets.

Management Takeaway

Past credit problems make realized loss experience more important than optimistic portfolio growth targets.

Valuation

Current Valuation

Metric	Value
Price Snapshot	$7.39 — 2026-11-03 regular-session close, America/New_York
Market Capitalization	$2.78B
Enterprise Value	N/A — not used; see capital/settlement accounting discussion
Trailing P/E	4.80
Provider forward P/E	5.43
EV / Sales	N/A — unadjusted metric excluded

Comparable Company Analysis

Company	Relevance	Public / Private	Forward P/E	EV / Sales	Growth / Margin / Risk Context
STNE — StoneCo Ltd.	Subject company	Public	5.43	N/A — financial / share-class mismatch	Brazilian merchant payments and banking; 3Y revenue-growth estimate 7.01%; operating margin 45.67%
Brazilian incumbent bank acquirers	Direct operating competitor / substitute	Operating businesses within listed banks	N/A	N/A	merchant acquiring and credit distribution; no compatible standalone public multiple used
PAGS — PagSeguro/PagBank	Direct Brazilian merchant acquiring/banking comparator	Public	6.36	0.86	Brazilian acquiring and merchant banking; 3Y revenue-growth estimate 3.78%; operating margin 37.76%
Cielo; Rede; Getnet	Direct: Brazilian merchant acquiring	Mixed / standalone valuation not used	N/D — no matched snapshot collected	N/D — no matched snapshot collected	Competes on acquiring price and service
Mercado Pago	Direct segment: Brazilian merchant payments and accounts	Operating product / listed parent	N/D — no matched snapshot collected	N/D — no matched snapshot collected	Competes for merchant transaction flows

Comparable takeaway: Domestic merchant acquiring and banking define Stone’s core set. dLocal’s global cross-border merchant model and Nubank’s broader consumer bank are excluded as like-for-like peers. Quoted multiples retain their original dated snapshot; missing matched multiples are not estimated. Consolidated parent multiples do not isolate the competing product. No mechanical peer average is used.

The base terminal P/E is 10×, versus the provider's current forward P/E of 5.43×. Holding that quoted multiple constant on this model's 2029 EPS gives an illustrative present value of $9.49, versus the central base FV of $17.48. Earnings definitions differ, so this is a sensitivity check; it makes the dependence on a rerating or derating explicit.

Valuation Scenarios

Scenario	Key Assumptions	Fair Value	Probability	Probability Rationale	Return From Price Snapshot
Bear	3Y revenue CAGR 0%; sustainable 2029 EPS $1.20 after compensation; 6× P/E; 17% discount rate; Credit and FX pressure limit 2029 USD EPS to $1.20.	$4.50	30%	Execution, financing or competitive setbacks remain credible	-39.1%
Base	3Y revenue CAGR 10%; sustainable 2029 EPS $2.80 after compensation; 10× P/E; 17% discount rate; Stable merchant economics and disciplined capital returns produce $2.80 of 2029 USD EPS.	$17.48	50%	Most likely operating trajectory, requiring measurable progress	+136.5%
Bull	3Y revenue CAGR 18%; sustainable 2029 EPS $4.00 after compensation; 13× P/E; 17% discount rate; Successful cross-sell and controlled credit losses produce $4 of 2029 USD EPS.	$32.47	20%	Successful product conversion and operating leverage; not assured	+339.4%
Probability-Weighted	Sum of each scenario value × its probability	$16.58	100%	Judgmental scenario probabilities	+124.4%

Valuation Takeaway

• Primary valuation method: Present value of sustainable 2029 equity earnings × scenario P/E, plus assumed interim dividends. The three-year discount horizon approximates late-2029 earning power.
• Cross-check methods: Direct competition, quoted peer multiples, current cash conversion, and the separate revenue/share/net-margin bridge in the valuation workpaper.
• Key valuation dependencies: Merchant payments growth and funding economics; Credit losses and capital requirements; Governance, FX and capital returns. All forward figures are independent research assumptions, not company guidance or consensus.
• Valuation confidence / Risk Level: 41/100 / High. Scenario values are sensitive to sustainable earnings and terminal multiples.
• Margin-of-safety conclusion: Buy at $12.07. New-file boundaries use Strong Buy = min(P/W FV ÷ 1.5, 1.1 × bear FV), Buy upper = P/W FV ÷ 1.25, Avoid above = P/W FV ÷ 0.90. Returns are to present fair value, not annualized returns or price targets for a particular date.

Analyst Questions

The table consolidates related questions and follow-ups from each material participant in the complete call.

Analyst / Firm	Core Question	Management Response	Research Read-Through
Eric Ito / Bradesco BBI	What drives allowances and the credit-loss outlook?	Management said losses are elevated and normalization is expected later.	Treat the stated timetable as conditional on demonstrated execution.
Daniel Vaz / Safra	What is needed to achieve full-year guidance?	Management said second-half transaction acceleration is required.	Treat the stated timetable as conditional on demonstrated execution.
Antonio Ruette / BofA	How do large borrower defaults affect reported delinquency?	Management said concentrated exposures affect the reported figures.	Confirm that this opportunity converts into profitable recurring demand.
Neha Agarwala / HSBC	How are Ton and SMB customer economics assessed?	Management said it evaluates the whole customer relationship.	Confirm that this opportunity converts into profitable recurring demand.
Arnon Shirazi / Citi	How quickly can communication and service problems affecting churn be fixed?	Management said service fixes need time.	Confirm that this opportunity converts into profitable recurring demand.
Renato Meloni / Autonomous Research	What affects quarterly transaction-revenue comparisons?	Management said quarterly incentives affect the comparison.	Confirm that this opportunity converts into profitable recurring demand.
Pedro Leduc / Itaú BBA	How do deposits affect funding costs as assets grow?	Management said deposits help, but asset growth may outpace them.	Require durable cash conversion after compensation and ongoing investment.
Guilherme Grespan / JPMorgan	How do government lending guarantees affect credit risk and provisions?	Management said guarantees change risk without eliminating all provisions.	Confirm that this opportunity converts into profitable recurring demand.
Kaio Prato / UBS	How do credit and POS accounting changes affect balance-sheet comparisons?	Management said reclassifications distort the comparisons.	Confirm that this opportunity converts into profitable recurring demand.

Analyst-Q&A Takeaway

Credit allowances and customer churn are material challenges; management expects improvement rather than demonstrating it. Guarantees and accounting reclassifications do not eliminate underwriting risk or the need for stronger transaction growth.

Thesis Monitoring

Driver	Current State	Positive Trigger / Catalyst	Negative Trigger / Falsifier	What It Changes
Merchant payments growth and funding economics	Distribution and merchant relationships can support recurring payments and financial-service earnings.	Revenue trajectory sustains approximately 10% annual growth on a comparable basis	Growth remains below the 0% bear assumption over a full operating cycle	Revenue outlook and scenario probabilities
Credit losses and capital requirements	Merchant retention, take rates, funding spreads, credit losses and risk-adjusted return on capital drive value.	After-cost earnings progress toward the base implied net margin of 17.6%	Competition, credit losses or service costs make that margin trajectory unattainable	Margins, moat score and valuation multiple
Governance, FX and capital returns	Q2 revenue and income from continuing operations were R$3.587 billion.	Financing and compensation remain consistent with 217.0M economic shares in the 2029 base case	Required capital or cumulative dilution materially exceeds the model without matching earnings	Financial score, confidence and downside value

Quality & Opportunity Scorecards

Quality Score

Component	Score	Weight	Weighted Contribution	Evidence
Business durability and economics	70	25%	17.5	Merchant retention, take rates, funding spreads, credit losses and risk-adjusted return on capital drive value.
Moat and competitive position	65	25%	16.3	Local distribution, service and integrated merchant relationships create a moderate advantage.
Growth runway and durability	71	20%	14.2	Brazil's digital payments and merchant banking remain substantial markets with intense competition from bank acquirers, digital banks and fintechs.
Financial quality and balance sheet	58	15%	8.7	Q2 revenue and income from continuing operations were R$3.587 billion.
Management, governance and capital allocation	56	15%	8.4	Capital returns can create value at a low multiple if supported by durable earnings and adequate capital.
Quality Score	65.1	100%	65.1	Weighted score, independent of ownership and current price

• Quality Tier: B
• Speculative override: None

Opportunity Score

Component	Raw Input	Normalized Score	Weight	Weighted Contribution
Quality	65.1	65.1	30%	19.5
Probability-weighted upside	+124.4%	100.0	35%	35.0
Bear-case downside	-39.1%	10.9	20%	2.2
Risk / valuation confidence	41	41.0	15%	6.1
Opportunity Score		62.9	100%	62.9

• Opportunity Rank: #20 of 76
• Zone Status: Buy

Portfolio Context

• Tracking tier: On the Radar
• Owned: Yes
• Tracking source of truth: ontheradar.md
• Portfolio source of truth: portfolio/holdings.md
• Scoring independence: Ownership, account, shares, position size and cost basis do not change research, valuation, Quality, Opportunity, rank or zones.

Investment Decision History

Timestamp	Price	Rating	Zone Status	Buy Zone	Strong Buy Zone	Avoid Chasing Above	Base FV	P/W FV	P/W Return	Quality	Opportunity / Rank	Change / Rationale
2026-10-21 (America/New_York)	$12.07	Buy	Buy	>$4.95–$13.26	≤ $4.95	> $18.42	$17.48	$16.58	+37.4%	65.1	60.7 / #24	Initial missing-file analysis; common-universe ranking; independent scenario assumptions

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Material Sources

Source	Type	Date / Period	What It Supports
www.sec.gov	Company IR / earnings filing	Q2 2026	Latest operating results, guidance, products and financial supplement
STNE complete earnings-call transcript	Transcript	Q2 2026	Prepared remarks and all material Q&A exchanges
STNE regular-session historical price	Market data	2026-10-20 close	Common price used in returns, scores and zones
STNE valuation statistics	Market data	2026-10-20 close; ratios retrieved 2026-10-21	Market capitalization, shares, quoted multiples and current ratios
STNE historical income statement	Standardized financial statements	Latest reported period and two preceding fiscal years	Historical income statement; source-native currency and definitions
STNE historical balance sheet	Standardized financial statements	Latest reported period and two preceding fiscal years	Historical balance sheet; source-native currency and definitions
STNE historical cash flows	Standardized financial statements	Latest reported period and two preceding fiscal years	Historical cash flows; source-native currency and definitions
PagSeguro/PagBank statistics	Comparable-company market data	2026-10-20 regular close	Peer multiples and financial context; public quote basis