PayPal (NASDAQ: PYPL) has again demonstrated that it is one of the best fin-tech companies around. The latest batch of the financial numbers indicates that PayPal just keeps growing and growing and growing some more.

The big growth at PayPal Holdings was in revenues which increased by $50 million (€42.02 million) during second quarter 2017. Ycharts data indicates PayPal reported $11.27 billion in revenues in March 2017 and $11.76 billion (€9.88 billion) in June.

Income was also up slightly in the same period from $1.42 billion in March to $1.508 billion (€1.27 billion) in June. Other numbers that grew at PayPal included:

• Free cash flow which went from $603 million (€503.76 million) in March to $747 million (€627.81 million) in June.

• Cash from operations which went from $3.171 billion (€2.67 billion) in March to $3.396 billion (€2.85 billion) in June.

• Cash from financing which increased from $1.871 billion (€1.57 billion) to $2.369 billion (€1.99 billion) between March and June.

• Cash and short-term investments increased from $4.055 billion (€3.41 billion) to $4.091 billion (€3.44 billion) during Second Quarter 2017.

• The number of PayPal accounts grew by seven million during second quarter 2017, Statista data indicates. There were 203 million registered PayPal accounts in first-quarter 2017, and 210 million in second-quarter 2017.

• A market capitalization of $73.90 billion (€62.11 billion) on 1 September, 2017.

• An enterprise value of $69.81 billion (€58.67 billion) on 1 September, 2017.

• Assets of $35.29 billion (€29.66 billion) on June 30, 2017.

It looks as if PayPal has become that rare animal; a tech company that grows steadily, and makes more money in the process. My guess is this growth is being driven by the spread of apps and the relentless growth of next-generation payment solutions such as cryptocurrencies.

How Cryptocurrency and Payment Apps drive PayPal’s Growth

Cryptocurrencies and payment apps; such as Alphabet’s (NASDAQ: GOOG) Android Pay, are driving the growth by getting tens of millions of people around the globe used to paying online. The only interaction many individuals in developing countries have with the financial services and banking systems is through mobile solutions such as digital wallets.

That situation is great for PayPal because it creates vast numbers of new customers. People who get used to paying with everything via their phones will start using PayPal for their banking and online payments. A major opportunity for PayPal is to serve as a pass through solution through which the proceeds of cryptocurrency transactions enter the traditional financial system.

An example of this would be a person who sells some DASH, then deposits the proceeds in his PayPal account. He might then use it to Venmo money to his brother; buy something online or purchase some groceries using Android Pay or his PayPal MasterCard.

A Big Opportunity for PayPal in Cryptocurrency

A vast potential market for PayPal will be converting cryptocurrencies such as Litecoin, Bitcoin, NEO, Ethereum and DASH into government paper.

Such technology already exists, the Singapore unicorn TenX claims its’ digital wallet can covert eight altcoins including DASH and Ethereum to dollars. TenX’s British rival Uquid goes further and claims its’ solution can convert 91 cryptocurrencies into pounds, dollars and euros.

If PayPal were to add such capabilities to its wallet, it would become the world’s dominant cryptocurrency clearinghouse possibility overnight. Among other things, this would enable PayPal to start making loans in altcoins, factor invoices in altcoins and possibly issue its own cryptocurrency. That would invite trouble including interference from government regulators.

One entanglement PayPal has so-far avoided is being forced to register as a bank in the United States. Sooner or later some regulator; such as the Federal Deposit Insurance Corporation (FDIC), is going to raise this issue with PayPal and make life really tough for it.

Is PayPal Undervalued?

All this will make investors wonder if PayPal Holdings’ stock is undervalued. My answer would be yes when it is compared with social media giant Facebook (NASDAQ: FB).

Like Facebook, PayPal is in the social media business. Some of PayPal’s products; including the digital wallets and Venmo, are social media solutions. Those solutions have the potential reach a vast new market in the developing world via mobile phones – much like Facebook’s WhatsApp.

Despite that Facebook was trading at $172.02 (€144.57) a share on September 1, 2017, and PayPal was trading at $61.46 (€51.65) a share on the same day. PayPal is clearly the value investment here because its’ potential is underestimated by the market.

More importantly PayPal is making a lot of money right now. In addition all the cash it generates investors received a 10.42% return on equity from PayPal shares on June 30, 2017.

As with Facebook, there’s no dividend at PayPal but there will be someday – and when there is it will be a juicy dividend. Similar financial solution providers are already paying out nice ones, MasterCard (NYSE: MA) delivered a dividend of 22¢ (€0.22) on July 5, 2017. American Express (NYSE: AXP) paid out a 32¢ (€0.27) dividend on the same day.

Yes, Mr. Market PayPal is a Value Investment

PayPal is now a value investment because it is a reliable moneymaker with vast growth potential that is undervalued. Those who invest in PayPal today will not lose money and might be rewarded with spectacular growth and nice dividends at some point in the future.

A slightly different version of this piece previously appeared at Market Mad House.