You may not have heard of dLocal(NASDAQ: DLO) before, but this fast-growing fintech company is helping major corporations access emerging markets around the world.
What Does dLocal Do?
dLocal provides an easy-to-use payment platform that allows companies to accept and make payments in countries with developing modernized payment systems like India, Turkey, Bangladesh, and Peru.
Instead of each company trying to build their own payment infrastructure in these countries, dLocal offers a plug-and-play solution. This saves companies time and money while still giving them access to fast-growing markets.
Some of dLocal’s notable clients include Amazon, Shopify, Spotify, Microsoft, and Didi. These companies are willing to give up some revenue to dLocal in exchange for the ability to tap into new markets and geographies.
Stellar Financial Results
This has proven to be a winning strategy for dLocal. The company has been thriving financially:
- In Q3 2022, dLocal’s revenue grew 47% year-over-year to $164 million.
- Total payment volume processed increased 69% compared to Q3 2021.
- Despite still being an early-stage tech company, dLocal posted a profit of $40.4 million and an impressive 25% profit margin.
dLocal is able to be profitable already because it charges clients a small percentage fee on transactions. As payment volume increases, so do revenues and profits.
Valuation Lags Growth Potential
Despite this strong growth and profitability, dLocal continues to fly under Wall Street’s radar. As a result, the stock trades at a very reasonable valuation compared to its potential.
dLocal’s market cap is around $10 billion. You can buy shares today for just 21x expected 2024 earnings.
To put that into perspective, that is roughly the same P/E ratio as Alphabet, even though dLocal is growing much faster as a smaller company.
Huge Room for Growth Ahead
dLocal still has a long growth runway ahead of it. The company is rapidly expanding into new geographies and signing up new merchants.
In Q3 alone, dLocal grew its number of active merchants by 123% compared to a year ago. The company also recently expanded into new attractive markets like Egypt and South Africa.
As more shoppers in emerging markets shift to digital payments, dLocal stands to benefit tremendously. eCommerce sales in developing nations are predicted to reach $3.5 trillion by 2024, up from just $1 trillion in 2019.
dLocal is positioned perfectly to capitalize on this trend. The company’s revenue is projected to grow at a 40% CAGR through 2025 as more merchants leverage its platform.
Key Takeaway for Investors
In summary, dLocal is a fast-growing fintech company enabling major corporations to access emerging markets around the world. Despite stellar growth and profits, the stock trades at a very reasonable valuation.
With huge room for expansion ahead, savvy investors may want to take advantage of dLocal’s overlooked status before the crowds discover this gem. Buying shares around current levels could pay off handsomely in the long run.
Frequently Ask Questions
What exactly does dLocal do?
dLocal provides an easy-to-use payment platform that allows companies to accept and make payments in emerging markets like India, Turkey, Bangladesh, and Peru. This saves companies time and money compared to building their own payment infrastructure in these countries.
Who are some of dLocal’s major clients?
Some of dLocal’s biggest clients include Amazon, Shopify, Spotify, Microsoft, and Didi. These companies use dLocal’s platform to access fast-growing markets.
Why is dLocal able to be profitable already?
dLocal charges its clients a small percentage fee on transactions processed through its platform. As payment volume increases, so do revenues and profits. This fee-based model allows dLocal to be profitable even as a high-growth company.
How fast is dLocal growing?
In Q3 2022, dLocal’s revenue grew 47% year-over-year. Total payment volume processed increased 69%. The number of active merchants on its platform grew 123% compared to a year ago.
Why is dLocal stock attractively valued?
Despite strong growth and profits, dLocal trades at a P/E of just 21x expected 2024 earnings. This is around the same valuation as Alphabet, even though dLocal is growing much faster as a smaller company still in the early stages.
Does dLocal have a big market opportunity?
Yes, ecommerce sales in emerging markets are predicted to reach $3.5 trillion by 2024, up from $1 trillion in 2019. As digital payments grow in these markets, dLocal stands to benefit greatly.