◆ What the Market Isn't Pricing In

Here is the puzzle worth sitting with. StoneCo trades at roughly four to five times its earnings — a multiple the market reserves for businesses it believes are in terminal decline, melting ice cubes to be run off rather than franchises to be owned. And yet the numbers the company actually reported for 2025 do not look like a business melting. Return on equity reached twenty-six percent. Adjusted earnings per share grew by a third in the fourth quarter. The credit book, so recently a source of disaster, was rebuilt to about R$2.8 billion¹ and growing. Banking clients and deposits climbed by a fifth and a quarter respectively. And management guided earnings higher still for 2026. The gap between the pessimism embedded in the price and the performance shown in the results is the most interesting thing about this stock, and it is worth trying to understand what the market is so worried about — and what it may be missing.

The worries are real and I have catalogued them: Pix eroding card economics, relentless competition compressing take rates, a payments volume that has slowed to the low single digits, Brazil's punishing interest rates, a volatile currency, and the not-forgotten memory of the 2021 credit blowup. Stacked together, they build a story of a challenged company in a hostile market, and a nervous market has priced that story in full. At four times earnings, the shares are valued as though² the profits will shrink from here.

What that price may underweight is the difference between a business under pressure and a business in decline. Stone is under genuine pressure, but it is also, right now, growing its earnings, compounding its book value at a high return on equity, and throwing off enough cash to buy back R$1.8 billion of its own stock in a single year³ — retiring shares at a low multiple, which quietly lifts the per-share value of what remains. A company genuinely melting does not post a twenty-six percent return on equity and guide earnings up; it bleeds. The market has arguably confused a hard, competitive, low-multiple business with a doomed one.

There is also a strategic point the multiple may miss. The whole thrust of Stone's evolution — from acquirer to financial operating system — is a deliberate migration away from the commoditizing payments fee and toward the stickier, higher-value banking and credit relationship. If that migration keeps working, the part of the business the market most fears (take rates squeezed by Pix and competition) matters less each year, while the parts it is not paying for (deposits, credit, the integrated small business relationship) matter more. The bear case is essentially a bet that the payments erosion overwhelms the banking build-out. The results so far suggest the build-out is holding its own.

None of this is a prediction, and the risks are not imaginary; a business this sensitive to Brazilian rates and this exposed to Pix could certainly disappoint. But the honest observation is that the market is not pricing StoneCo as a risky, competitive, well-run fintech growing its earnings in a tough market — which is what the 2025 results describe. It is pricing it as a business on the way out. The thing the market may not be paying for is the simple possibility that Stone is neither a rocket nor a ruin, but a durable, cash-generative franchise worth rather more than four times earnings — and that in the meantime, its own aggressive buybacks are compounding value for the owners who wait.