We came across a bullish thesis on DLocal Limited (DLO) on Substack by The Reservist. In this article, we will summarize the bulls’ thesis on DLO. DLocal Limited (DLO)'s share was trading at $7.88 as of April 8^th. DLO’s trailing and forward P/E were 20.22 and 14.06 respectively according to Yahoo Finance.

A customer making a purchase at a modern retail store terminal, showing the ubiquity of the company’s payment solutions.

D-Local (DLO) is beginning to stand out as a compelling stock idea, particularly for investors focused on long-duration growth at a reasonable price. Despite operating in the volatile world of emerging market fintech, DLO is trading at just ~13x next-twelve-month adjusted EBITDA—remarkably low for a company growing at 25% annually and with a strong history of profitability. Since going public in 2021, the stock has been beaten down, most recently falling another 20–25% after its Q4 2024 earnings and 2025 guidance. The reaction appears to reflect short-term pressures rather than structural flaws, which may be creating a significant mispricing in the stock.

At the core of DLO’s business is its position as a one-stop payment processor across emerging markets in Latin America, Africa, and Asia. The company has grown its Total Payment Volume (TPV) at a 92% CAGR over six years and built a sticky, high-quality client base including Amazon, Google, and Spotify. Payment processing businesses tend to be extremely durable and profitable over time, and DLO is already EBITDA-positive and generating meaningful cash. However, the recent decline in its take rate—from 1.4% to around 1.1%—has raised concerns. While some margin pressure is expected in a scale-driven business model, further compression could challenge the company’s ability to sustain profitability without massive volume growth. This compression, along with increased operating costs from a larger headcount, has temporarily clouded the company’s margin profile and spooked investors.

Still, these pressures may be more cyclical or strategic than structural. The long-term opportunity remains massive, and DLO's valuation reflects very little optimism. The stock is priced as if growth is stalling or profitability is eroding permanently, despite evidence of strong client retention, geographic expansion, and ongoing reinvestment in the business. With one of the most attractive TAMs in fintech—serving the underpenetrated and high-growth regions of the Global South—DLO could re-rate significantly if execution continues and take rate concerns stabilize. The presence of a seasoned CFO from MercadoLibre adds further confidence in the leadership’s ability to steer through volatility.

DLO is not without risks, but the current price may offer a rare entry point into a category-leading fintech stock with real scale, high growth, and long-term margin potential. If DLO regains investor confidence and begins to show leverage on its operating base, the stock could be worth far more than current levels suggest.

DLocal Limited (DLO) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 19 hedge fund portfolios held DLO at the end of the fourth quarter which was 21 in the previous quarter. While we acknowledge the risk and potential of DLO as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than DLO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.