Why StoneCo Stock Surged This Week

StoneCo (NASDAQ: STNE) stock rose higher this week thanks to better-than-expected quarterly results. The Brazil-based fintech company's share price gained 14.2% across the week's trading, according to data from S&P Global Market Intelligence.

After the market closed on Tuesday, StoneCo published its fourth-quarter results, beating Wall Street's expectations for sales and earnings. The business posted sales of 3.61 billion Brazilian real (roughly $636 million), beating the average analyst estimate's call for sales of 3.58 billion real (roughly $631 million). Non-GAAP (adjusted) earnings per share came in at $0.40, beating the average analyst target by $0.06 per share.

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StoneCo stock jumped on Q4 beats

StoneCo's revenue increased roughly 11% year over year in the fourth quarter, and adjusted earnings per share increased roughly 47%. Continued customer additions and an increase in average revenue per user in the financial services unit powered sales growth in the period. Total payment volumes for small and medium-sized business customers using the company's platform rose 22% compared to the prior-year period. The business also continued to rapidly scale its credit business back up in the quarter.

What's next for StoneCo?

Despite the rally this week, StoneCo stock is still down roughly 34% over the last year. The company's share price has been pressured by macroeconomic conditions in Brazil and some growth deceleration. But the outlook could be becoming more favorable for the fintech services provider.

Inflation has started to cool off in Brazil, which could pave the way for StoneCo to deliver improved business results and stock performance. Macroeconomic dynamics still present significant risk factors for StoneCo, but the stock looks cheaply valued, trading at roughly 8 times this year's expected earnings.

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Keith Noonan has positions in StoneCo. The Motley Fool has positions in and recommends StoneCo. The Motley Fool has a disclosure policy.