Sector Update: Financial Stocks Higher Friday Afternoon

StoneCo Ltd. shares are moving higher on Friday after the company announced a share repurchase plan. Here’s what you need to know.

What To Know: Under the plan, Stone plans to repurchase shares worth up to R$ 2 billion ($344.6 million).

The repurchase plan will replace its previous program, announced last year, in which Stone repurchased a total of 13,202,939 shares at an average price of R$ 20.45 per share, totaling R$ 1.03 billion.

“We are pleased to announce the completion of our previous R$1 billion share repurchase program, underscoring our robust financial position. As part of our ongoing commitment to maximizing shareholder returns, we continuously evaluate the most effective use of our resources,” said Pedro Zinner, CEO.

“Confident in our long-term vision, we have approved a new buyback program to seize the current market opportunities. Furthermore, we are finalizing a structured framework to guide our capital allocation strategy, which will enhance transparency and align with our strategic priorities once shared with the market.”

How To Buy StoneCo Shares

By now you're likely curious about how to participate in the market for StoneCo – be it to purchase shares, or even attempt to bet against the company.

Buying shares is typically done through a brokerage account. You can find a list of possible trading platforms here. Many will allow you to buy ‘fractional shares,' which allows you to own portions of stock without buying an entire share. For example, some stocks, like Berkshire Hathaway, can cost thousands of dollars to own just one share. However, if you only want to invest a fraction of that, brokerages will allow you to do so.

In the case of StoneCo, which is trading at $10.29 as of publishing time, $100 would buy you 9.72 shares of stock.

If you're looking to bet against a company, the process is more complex. You'll need access to an options trading platform, or a broker who will allow you to ‘go short' a share of stock by lending you the shares to sell. The process of shorting a stock can be found at this resource. Otherwise, if your broker allows you to trade options, you can either buy a put option, or sell a call option at a strike price above where shares are currently trading – either way it allows you to profit off of the share price decline.

See Also: Cathie Wood’s $3.8 Million Bitcoin Vision Met With Doubt: 83% Say Not By 2030

STNE Price Action: At the time of writing, StoneCo stock is trading 12.2% higher at $10.41, per data from Benzinga Pro.

Image: Image via Pixabay

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Financial stocks advanced in Friday afternoon trading with the NYSE Financial Index rising 0.8% and the Financial Select Sector SPDR Fund (XLF) gaining 1%.

The Philadelphia Housing Index climbed 1.5%, and the Real Estate Select Sector SPDR Fund (XLRE) rose 0.8%.

Bitcoin (BTC/USD) gained 0.7% to $99,039, and the yield for 10-year US Treasuries shed 2 basis points to 4.41%.

In economic news, the November flash reading of manufacturing conditions from S&P Global increased to a four-month high at 48.8 from 48.5 in October, slightly lower than an expected reading of 48.9 in a survey compiled by Bloomberg.

The University of Michigan consumer sentiment index was revised downward to 71.8 for November from 73 in the preliminary estimate, compared with expectations for an upward revision to 73.9 in a survey compiled by Bloomberg.

In corporate news, StoneCo shares jumped 12%, a day after the company's board authorized the repurchase of up to 2 billion Brazilian reais ($343.9 million) in class A shares.

Investors interested in Internet - Software stocks are likely familiar with StoneCo Ltd. (STNE) and Paycor HCM, Inc. (PYCR). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Currently, StoneCo Ltd. has a Zacks Rank of #1 (Strong Buy), while Paycor HCM, Inc. has a Zacks Rank of #2 (Buy). This means that STNE's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one piece of the puzzle for value investors.

Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its current share price levels.

Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.

STNE currently has a forward P/E ratio of 7.64, while PYCR has a forward P/E of 30.86. We also note that STNE has a PEG ratio of 0.33. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. PYCR currently has a PEG ratio of 2.17.

Another notable valuation metric for STNE is its P/B ratio of 1.04. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, PYCR has a P/B of 2.36.

These are just a few of the metrics contributing to STNE's Value grade of B and PYCR's Value grade of D.

STNE is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that STNE is likely the superior value option right now.

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