shares PayPal (PYPL 1.38%) Although the stock has generally been strong since the beginning of August, it fell after the third-quarter earnings report. Meanwhile, it increased by more than 50% last year.

Even though the pullback is small, let’s see if this is a good opportunity to buy the stock on the dip.

Margins above revenue growth

Although investors were disappointed with PayPal’s forecast, this was actually the third time this year the company had raised its forecast. It said it now sees adjusted earnings per share (EPS) growing in the high-teens percentages and trading margin widening in the mid-single digits. It said the increase was due to both strong results in the third quarter and a slightly improved outlook for the 4th quarter.

For Q4 specifically, the company is forecasting low-single-digit percentage revenue growth and has set EPS to decline by a low-to-mid-single-digit percentage due to discretionary capex. Analysts expected revenue to grow 5.4% in Q4, according to estimates compiled by LSEG.

The company said part of the reason for slower revenue growth in Q4 was due to prioritizing wider margins over revenue growth as it renegotiated contracts for its Braintree unit, which provides payment services to e-commerce businesses. It was stated that this exchange will continue until 2025 before a new baseline is determined.

This quarter, PayPal’s revenue increased 6% to $7.8 billion, and total payment volume (TPV) increased 9% to $422.6 billion. Payment transactions increased by 6% to 6.6 billion, while payment transactions per active account increased by 9% to 61.4 in the last 12 months.

Branded payment TPV increased by 6% fixed currency On an ongoing basis, similar to last quarter, unbranded TPV grew 11%, slowing from the 19% growth seen in the second quarter. Meanwhile, Venmo TPV was up 8%, the same as last quarter.

Active accounts reached 432 million, up 0.9% year over year and up 0.6% sequentially.

Trading margin dollars, similar gross profit marginIt increased by 8% to $3.65 billion. This metric has been a focus for investors in recent years as PayPal has managed to grow its revenue, but it has come from lower-margin sources. Under Chief Executive Officer Alex Chriss, the company is now focusing on gross profit growth beyond revenue growth.

Adjusted EPS rose 22% to $1.20. This easily beat analysts’ consensus of $1.07.

The company achieved revenue in the quarter free cash flow $1.4 billion (remaining cash flow after capital expenditures). Meanwhile, it repurchased $1.8 billion worth of stock during the period. It closed the quarter with net cash and investments of $3.8 billion.

Image source: Getty Images.

Is it time to buy the dip?

While investors may not like PayPal temporarily slowing revenue growth to improve margins, it’s the right move long-term. Chriss, meanwhile, is trying to transform the business from a payments company into a commerce platform that could help major e-commerce players. Amazon And ShopifyIn addition to payment platforms such as Adyen And finservThese have all formed partnerships in the last few months.

This will be achieved through continuous innovations such as Fastlane, PayPal Everywhere and new mobile features. Fastlane, which increases conversion by allowing customers to checkout at various merchants with a single tap without having to create an account, has seen good initial reception since its launch in August. PayPal Everywhere, meanwhile, launched last month and offers users cash back incentives on their PayPal debit card. These innovations should help support growth.

Despite its recent strong performance, PayPal shares remain attractively valued and forward price-earnings (P/E) rate is about 16.6 times and forward selling price (P/S) According to 2025 estimates, this rate was only 2.4 times.

PYPL PE Ratio (Forward 1y) data Y Charts

The company is clearly heading in the right direction under Chriss, who prioritizes profitable growth and innovation above all else. This should be a winning recipe in the long run. PayPal is transforming its business, and investors have a chance to get involved as the company evolves.

Therefore, I will be a buyer of the stock at these levels.