Is StoneCo Ltd. overvalued or undervalued?

As of 18 March 2025, the valuation grade for StoneCo Ltd. has moved from fair to risky, indicating a shift towards a more cautious outlook. The company appears to be overvalued, particularly given its P/E ratio of 10, which is significantly lower than the industry average, alongside a negative EV to EBIT of -15.55 and a negative EV to EBITDA of -34.83. The PEG ratio of 0.89 suggests that the stock may not be as attractive as it seems when considering growth prospects.
In comparison to its peers, StoneCo Ltd. has a P/E of 12.97, while BlackLine, Inc. has a much higher P/E of 35.70, indicating a stark contrast in valuation. Additionally, the return metrics show that StoneCo Ltd. has outperformed the S&P 500 across multiple periods, with a year-to-date return of 140.65% compared to the S&P 500's 12.22%. However, the long-term performance is concerning, with a 5-year return of -62.76% versus the S&P 500's 96.61%, reinforcing the notion that the stock may be overvalued at its current price.