THE MOTLEY FOOL TAKE Stoneco for consideration

Another company bearing my current name opened its first warehouse in Seattle in 1983, and it was the first company to grow from zero to $3 billion in sales in less than six years. Those companies merged in 1993, and today, I’m a retail powerhouse, with a recent market value topping $320 billion and 872 warehouses around the world (including 600 in the U.S.). On average, I only mark up products by 11% to 13%. Who am I? (Answer: Costco)

Stoneco (Nasdaq: STNE) is a Brazilbased financial technology (“fintech”) company that provides payment processing services and other offerings. The company’s stock has plunged some 80% from its high in 2021, due in part to issues with its lending business and investors pivoting aggressively away from fintech companies with growthdependent valuations.

Stoneco took some big losses on bad loans in its portfolio, and temporarily suspended issuing new loans to applicants. But right now, there’s a lot to like about Stoneco. It started to offer new loans through its credit unit again, and its payment processing business is powering stellar results. The total number of customers using its payment platform grew 41.7% year over year to reach 3.3 million in the third quarter, and the company increased its average transaction fee to 2.49% from 2.21% in the prior-year period.

Overall revenue increased 25.2% year over year in the third quarter, and adjusted income skyrocketed 302%. The company doesn’t have a decadeslong track record of growth, and it has experienced significant management turnover. But with a recent forwardlooking price-to-earnings (P/E) ratio of 12, well below the five-year average of 35, Stoneco has the makings of a dirtcheap growth stock at current prices. (The Motley Fool owns shares of and has recommended Stoneco.)