PayPal Holdings (NASDAQ: PYPL) is again demonstrating that digital wallets are the future of payment. The granddaddy of digital wallets is also showing us that mobile and online payment is very lucrative.

PayPal’s net payment volume grew by 30% between 3rd quarter 2016 and 3rd quarter 2017, rising from $87.40 billion (€75.28 billion) to $114.05 billion (€98.24 billion), data from Statista indicates. That money came from the 1.73 billion transactions PayPal processed during the 3rd quarter of 2017.

Among other things that gave PayPal an annual payment volume of $354 billion (€304.93 billion) from 218 million accounts at the end of 3rd quarter 2017, Statista calculated. The number of accounts at PayPal is growing rising from 192 million in 3rd quarter 2016.

Peer to Peer Payment is Booming

PayPal’s experiment in peer to peer or P2P payment Venmo is also paying off. Venmo’s transaction volume more than doubled from $3.9 billion (€3.36 billion) in 2nd quarter 2016 to $8 billion (€6.89 billion) in the same period in 2017, Recode reported. More impressively, Venmo’s yearly transaction volume might hit $40 billion for 2017.

Even more growth is possible because PayPal is now offering P2P payments through Facebook Messenger, which has 1.3 billion users worldwide. News reports did not say whether Facebook (NASDAQ: FB) plans to offer PayPal P2P through its other equally popular messaging solution WhatsApp which also has 1.3 billion users.

Either way, that deal is potentially worth tens of billions of dollars in revenue to PayPal. A few more such lucrative arrangements and PayPal will own the P2P sphere, it already supports Android Pay and is in a pretty good position to join Alphabet’s (NASDAQ: GOOG) other big payment app Tez.

Tez is the combination P2P and QR-code based instore payment solution that Google (NASDAQ: GOOGL) is offering in lieu of Android Pay in India. If PayPal can support several such solutions its digital wallet, it will dominate P2P and effectively throttle Apple Pay Cash in the cradle.

Is PayPal Making Money

Okay, all that potential momentum is great for growth investors, but is PayPal making money? The answer is yes, the massive fin-tech platform it is building is lucrative with a profit margin of 11.37% on 30 September 2017.

More importantly PayPal reported $1.575 billion (€1.36 billion) in income on that day. That income has been growing steadily for over three years. The company reported an income of $1.378 billion (€1.19 billion) in September 2016, and more than three times the $419 million (€360.92 million) PayPal reported back in December 2014.

Nor is it just income PayPal reported a free cash flow of $841 million (€724.42 million) on 30 September 2017. That was up from $618 million (€532.33 million) in September 2016. There was $3.601 billion (€3.10 billion( in cash from operations on September 30, 2017, up from $2.963 billion (€2.55 billion) in September 2016.

PayPal has lots of Value

Also attractive was $3.57 billion (€3.08 billion in cash from financing, more than double the $1.399 billion (€1.21 billion) reported in September 2016. That proves PayPal’s strategy of offering simple and flexible lines of consumer and business credit is working. This also makes PayPal something like a bank, which is going to attract the attention of regulators and politicians at some point.

Value investors will like the $4.921 billion (€4.24 billion) in cash and short-term investments achieved on 30 September 2017. That was way down from the $15.85 billion (€13.65 billion) PayPal had in the bank in September 2016, but it still gives the company lots of cash for experiment and acquisition.

This and the $37.76 billion (€32.53 billion) in assets, PayPal achieved on September 30, 2017, give the company a lot of value. Yet strangely it might be overvalued with a market cap of $85.14 billion (€73.34 billion) and an enterprise value of $80.49 billion (€69.33 billion) on 27 October 2017.

That occurred because investors are buying into the potential rather than the actual value, but there’s a good possibility PayPal will achieve that value. Even at the slight overvalue, PayPal has some value characteristics. All it really lacks is a dividend; which should be imminent, and lucrative when it appears.

PayPal is just scratching the surface of P2P

Even at $71.06 (€61.21) a share (the price on 27 October 2017), I think PayPal is a good buy because of its future potential. No company is in a better position to cash in on P2P and other next-generation payments solutions.

What’s truly exciting is that PayPal is just scratching the surface of P2P. There’s lots of growth out there, particularly in the developing world where mobile phones are becoming the bank of choice for the masses.

One solution alone Vodafone Group’s (NASDAQ: VOD) M-Pesa had 30 million users in February 2017, including most of the population of the nation of Kenya, CNN reported. If PayPal can join with Vodafone or Tez, it can attract tens of millions of customers in developing nations. Even greater growth is possible, if Venmo and PayPal credit can be offered in those nations.

A means of achieving this would to be use to harness the power of blockchain and cryptocurrency. A unicorn called MicroMoney already claims to have issued 40,000 loans and reached 100,000 users in five countries this year via blockchain and mobile phones. Harnessing that technology would enable PayPal to take PayPal Credit almost anywhere on Earth that regulators allowed it.

A Value Investment for the Future

Another blockchain-based solution that would help PayPal reach millions of new customers would be a cryptocurrency conversion app like the one TenX is experimenting with. TenX has developed a digital wallet and debit card that can convert several popular altcoins including Ethereum, Bitcoin, and DASH into fiat currencies. Only the reluctance of Visa and MasterCard is preventing TenX from rolling out that solution on large scale.

Cryptocurrency would be a natural means of growing PayPal’s ecosystem worldwide, especially if a government like that in China launches a national altcoin. This vast potential makes PayPal one of the most exciting and interesting investments today.

This humble fin-tech company has the potential to grow into a platform rivaling Amazon (NASDAQ: AMZN) and Google in size and scope. More importantly, PayPal has the potential to generate amounts of cash similar to those currently churned out by the monster banks or Goldman Sachs (NYSE: GS). PayPal is a value investment for the future.

Written by

Daniel G. Jennings is a writer who lives and works in Colorado. He is a lifelong history buff who is fascinated by stocks, politics, and cryptocurrency.

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