$Circle(CRCL.US)

Circle (CRCL.US) is currently trading at around $62 per share, with a market capitalization of approximately $15.3 billion. From a value investing perspective, the company presents several core contradictions worth noting.

**Poor Profitability Quality.** Circle is essentially a USDC stablecoin issuer, with revenue primarily derived from interest income on reserve assets (such as U.S. Treasuries). FY2025 revenue was $2.75 billion, a 64% year-over-year increase, but net profit turned to a loss of $69.5 million. FY2024 net profit attributable to the parent company was only $156 million (further reduced by $138 million in preferred stock dividends), leaving minimal profit for common shareholders. The net profit margin has continuously declined from 16% in Q3 2024 to 8% in Q1 2026, indicating poor profit stability.

**Expensive Valuation.** The current P/B ratio is about 4.5x, double the industry median of 2.2x; the P/S ratio is about 5.4x, also higher than the industry median of 3.2x. Based on the 2026 consensus EPS estimate of $0.82, the forward P/E is as high as 75x, far exceeding the reasonable range for traditional fintech companies. There is no dividend or dividend yield.

**Unique Balance Sheet Structure.** The vast majority of the $80.5 billion in total assets is USDC reserve assets, while the $77.1 billion in total liabilities corresponds to USDC holder equity. The actual net assets are only about $3.4 billion (net asset per share of $13.8). The equity multiplier is as high as 23.5x, essentially an "agent-holding" model, leaving a thin buffer of net assets against risks.

**Core Risk Lies in the Interest Rate Cycle.** The company's revenue is highly dependent on the Federal Reserve's interest rate levels. If the cycle enters a rate-cutting phase, the yield on reserve assets will be directly compressed, casting doubt on profit elasticity. It also faces competitive pressure from Tether (USDT) and global regulatory uncertainty regarding stablecoins.

Overall, Circle is in a state of being in a scarce sector but with valuations that are overextended. The current price fails to provide the safety margin required by value investing.