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Should You Consider Investing in These NYSE-Listed Plays - PAGS, CLB, DSS

Jan 05, 2022 | Team Kalkine

Read Time :5 min

Should You Consider Investing in These NYSE-Listed Plays - PAGS, CLB, DSS

PagSeguro Digital Ltd.

PAGS Details

PagSeguro Digital Ltd. (NYSE: PAGS) is a Brazilian company that offers financial technology solutions to micro, small, and medium-sized businesses (SMEs). PAGS also provides various services, such as cash-in and cash-out choices, working capital, and cash-flow management support. As of January 04, 2022, the company's market capitalization stood at USD 9.43 billion.

Latest News:

Achieving Milestones: On December 01, 2021, PAGS announced that on Black Friday, November 26, 2021, the company set a new record for daily TPV acquisition, hitting more than 1.1 billion BRL. According to the Brazilian Cards Association data, acquiring TPV increased by more than 45% from November 01 to November 29, compared to the same period the previous year.

Q3FY21 Results:

Boost in Topline: In Q3FY21 (ended September 30, 2021), the company reported a 47.87% increase in revenue from transaction activities and other services to BRL 1.79 billion, compared to BRL 1.21 billion in Q3FY20, attributable to 22.2% and 49.1% growth in active merchant base and acquiring Total Payment Volume (TPV), respectively.
Surge in TPV: PAGS Consolidated TPV increased by 85.78% YoY in Q3FY21, to BRL 125.58 billion from BRL 67.59 billion in Q3FY20.
Growth in Bottomline: In Q3FY21, net income increased by 22.06% YoY to BRL 321.5 million, up from BRL 263.4 million in Q3FY20.
Progress in Active Merchants: PAGS witnessed an increase in active merchants to 7.7 million in Q3FY21 from 6.3 million in Q3FY20.

Key Risks:

Dependence on Third Parties: Third parties offer the company facilities, infrastructures, components, and services such as data center facilities and cloud computing. If these third parties fail to deliver, PAGS' operations may be affected, causing consumer unhappiness and hurting the company's operations.
Supplier Concentration Risk: PAGS relies on the limited number of suppliers for some significant manufacturing equipment required to produce POS devices. Furthermore, a single manufacturer assembles and tests most of its POS equipment. As a result, any vendor breach of contract could put the company's operations in danger.

Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

PAGS Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

PAGS' stock price has fallen 54.72% in the past six months and is currently leaning towards the lower-band of its 52-week range of USD 24.13 to USD 62.83. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 43.81. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 30.85.

Considering the significant correction in the stock price in the past six months, strong top-line and bottom-line performance, current valuation, and associated risks, we recommend a "Buy" rating on the stock at the closing price of USD 25.68 down 10.21% as of January 04, 2022.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

* Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

Core Laboratories N.V.

CLB Details

Core Laboratories N.V. (NYSE: CLB) is a global oil and gas company that offers patented reservoir description, production improvement, and reservoir management services. CLB's clients benefit from these services because it assists them to improve reservoir performance and to get more oil and gas out of their fields. It has over 70 offices in over 50 countries and employs around 3,700 people worldwide.

9MFY21 Results:

Reduction in Revenues: CLB witnessed a YoY decline of 7.60% in its total revenues to USD 345.11 million during 9MFY21 (ended September 30, 2021) from USD 373.52 million during 9MFY20, attributable to the negative impact on the industry caused by the COVID-19 pandemic.
Increase in Bottomline: The company reported a net income of USD 17.43 million during 9MFY21 vs. a net loss of USD 111.02 million during 9MFY20 due to a decline in operating expenses.
Leveraged Balance Sheet: As of September 30, 2021, the company had cash and cash equivalents of USD 19.05 million and total debt of USD 188.46 million.

Key Risks:

Supplier Concentration Risk: For the company's specific product lines, a small number of third-party suppliers and sellers are available in the marketplace. This concentration in areas of its supply chains could harm companies operations if suppliers' prices, quality, availability, or timely delivery of their products are significantly disrupted.
Global Trade Risk: CLB has a presence in over 50 countries. As a result, any disturbance in the countries where it does business could harm its production and sales.

Outlook:

Q4FY21 Revenue Estimates: As of October 27, 2021, CLB expects to clock revenues in the range of USD 121.0 – 124.0 million in Q4FY21, with an operating income of USD 13.0 – 15.5 million, representing an operating margin of ~12%.
EPS Estimate: It also anticipates EPS of USD 0.18 - 0.22 in Q4FY21.

Valuation Methodology: Price/Earnings Per Share Based Relative Valuation

(Analysis by Kalkine Group)

CLB Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

CLB's stock price has fallen 29.75% in the past six months and is currently leaning towards the lower band of its 52-week range of USD 21.08 to USD 49.87. The stock is currently trading between its 50 and 200 DMA levels, and its RSI Index is at 61.56. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 32.51.

Considering the correction in the stock price, market dominance, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the current price of USD 25.78, up 5.53% as of January 04, 2022, 02:18 PM ET.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

DSS, Inc.

DSS Details

DSS, Inc. (NYSE: DSS), formerly Document Security Systems, Inc., is a global company with nine main business lines organized into five business divisions. DSS engages in printed items, rental income, and direct marketing to maximize company profits. The majority of revenue comes from the packaging and printing industry, creating custom consumer packaging for clients in the pharmaceutical, beverage, photo packaging, and direct marketing industries.

Latest News:

Expansion of Packaging Subsidiary: On December 22, 2021, DSS reported that the facility expansion of its consumer packaging subsidiary, Premier Packaging Corporation, is approaching completion, with operations set to start on February 1, 2022.
Issuance of Debt: On December 20, 2021, DSS announced that its subsidiary, American Pacific Bancorp, Inc. (APB), has issued almost USD 20 million in new loans since September 2021. APB plans to build and extend its lending platform to serve small and mid-sized commercial borrowers and acquire equity interests in commercial banks in the United States to expand its lending network and provide global banking services to clients worldwide.

9MFY21 Results:

Growth in Topline: Total revenues climbed by 29.56% to USD 13.22 million during 9MFY21 (ended September 30, 2021) from USD 10.20 million during 9MFY20, owing to higher packaging sales and sustained expansion into the direct marketing business.
Rise in Operating Losses: Operating losses at DSS increased to USD 15.99 million during 9MFY21, up from USD 4.81 million during 9MFY20.
Decent Balance Sheet: The company's cash and cash equivalents were USD 69.14 million as of September 30, 2021, with a total debt of USD 7.16 million.

Key Risks:

Customer Concentration Risk: In 9MFY21, two clients accounted for 43% and 73% trade accounts receivable balance. Furthermore, in 9MFY20, these two customers accounted for 37% of the company's consolidated revenue and 48% of the company's consolidated trade accounts receivable balance. As a result, losing any of these essential clients could harm the company's bottom line.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

DSS Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

DSS's share price has fallen 80.70% in the past nine months and is leaning towards the lower end of the 52-week range of USD 0.66 to USD 6.95. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 41.20. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 0.90.

Considering the significant correction in the stock price, a surge in topline, expansion programs, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the current price of USD 0.72, down 3.51%, as of January 04, 2022, 9:30 AM ET.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

* Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

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