$10,000 Invested in PayPal 5 Years Ago Is Worth About $2,590 Today. The Company Has Bought Back 8.6% of Its Shares Since January.

Although PayPal(NASDAQ: PYPL) was performing well prior to the COVID-19 pandemic, its business was catapulted due to rapidly rising adoption of digital payments during the depths of the health crisis. However, a notable slowdown since has pressured shares.

In the past five years, this fintech stock has generated a negative total return of 74% (as of Nov. 3). This means that had you invested $10,000 into PayPal shares back then, you'd have $2,590 today, a wildly disappointing outcome during a period that saw the S&P 500index produce a total return of 75%.

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Management is taking advantage of the dip. During the first nine months of 2026, PayPal shrunk its diluted outstanding share count by 8.6%. Here's what investors should make of the situation.

Profits continue to flow in

Despite what PayPal's stock performance suggests, this remains a highly profitable business. This is usually the case with scaled payment networks. The company's adjusted operating margin was 18.8% last quarter (Q3 2026 ended Sept. 30).

Through the first nine months of 2026, PayPal brought in $4.1 billion in free cash flow . This allowed the leadership team to repurchase $4.6 billion worth of its stock during this time. Consequently, the share count was reduced by 8.6%. And over the past 36 months, PayPal's diluted outstanding share count has come down 21.9%.

In December 2025, the company paid its first dividend. It currently yields 0.96%. However, stock buybacks continue to be the key capital allocation tool management uses aside from reinvesting into the business.

Should investors follow management?

Significant share repurchase activity indicates that the leadership team believes PayPal's stock is undervalued. CEO Enrique Lores mentioned this on the most recent earnings call. After all, shares trade at a dirt cheap forward price-to-earnings ratio of 9.7. Maybe there's an opportunity for investors to become aggressive.

Before you rush to follow what PayPal's management is doing, consider the bear case with this stock, which centers on a major growth slowdown. Net revenue rose by just 2% in the third quarter. And the flagship branded checkout solution saw total payment volume increase by 1%, after it was up 2% in Q2.

Executives raised full-year 2026 non-GAAP earnings per share guidance from $5.38 to $5.60, as cost cuts play a factor. But this doesn't help to drive rapid top-line gains, especially when competition makes things more difficult.