Brazilian fintech Nu Holdings Ltd. NYSE: NU has only been trading publicly for under three years, but it has already managed to accumulate over 100 million customers in Latin America. The company, which offers digital banking solutions without brick-and-mortar locations through its NuBank platform, has also drawn the interest of Warren Buffett, instantly catapulting it into must-watch lists of investors everywhere as a newly popular bank stock. Buffett’s Berkshire Hathaway Inc. NYSE: BRK-B held over 107 million shares of NU stock as of the end of the second quarter.

Nu shares fell by about 8% in the last week but remain up a whopping 86% over the past year. Based on analyst ratings, the company is currently categorized as a Moderate Buy and has a consensus price target of $14.08, representing 7.2% upside potential. Given that this increase would only roughly get the stock to where it was in mid-September, and particularly in light of how far it has risen in the last several months, investors may be wondering whether the time to get in on Nu Holdings has passed.

Earnings Performance Excels

Nu has a strong history of earnings performance in the last six quarters, including net income of $487 million for the most recent quarter. This represented EPS of 12 cents per share, topping analyst predictions of 10 cents. Revenue has also surged in recent quarters; in the second quarter of the year, Nu posted revenue of $2.8 billion, a full two-thirds higher than it was at the same time in 2023.

The company’s return on equity has also been impressive, as it is currently annualized to 27%. It maintains a debt-to-equity ratio of 0.25, uncommonly low for a financial institution and perhaps indicating that has over-relied on equity to finance growth.

It appears that Nu is showing no signs of slowing its earnings growth. Analysts project that the company will see earnings climb by more than 51% this year.

Nu Holdings’ Customer Base Is Skyrocketing

What is behind Nu’s rapid top- and bottom-line improvement? A key factor is the rapid increase to size of the company’s customer base as it has expanded within and outside of Brazil. Two years ago the firm had about 65 million customers, and today it has well over 100 million. About one out of every five adults in Brazil—some 34 million people—have not typically had access to traditional banking. Nu’s easy-to-access digital platform has rapidly opened up access to many of these individuals.

Nu is a leader in the fast-growing digital banking space in Latin America. In the last year, its customer growth has outpaced the five largest Brazilian incumbent banks combined. The company’s international expansion is also accelerating. At the midpoint of the year, it had nearly 8 million customers in Mexico and 1.3 million Colombian customers.

Engaged Customers With Room to Expand

On top of a rapidly growing base of customers, Nu has managed to engage those customers in multiple ways. By midway through the year, customers had, on average, 4.1 products active simultaneously. This helped to drive an increase in monthly average revenue per active customer to $11.20.

Besides increasing the number of customers it serves, Nu has room to expand in loans and credit cards, two of its least-utilized products. Fewer than one in 10 Brazilian adults uses the company’s loan products, and only about one in six has a Nu-branded credit card. This contrasts with the company’s traditional bank account services, which include about a third of all Brazilians among account holders.

Nu Stock: Overvalued or Space to Grow?

Given its rapid growth in the last year, it’s certainly possible that Nu Holdings’ most significant rally has already come and gone. The recent dip in stock price could be an indication of a larger trend to come, and the firm’s forward P/E ratio of 32.0 is high.

However, the company’s fundamentals—its earnings growth and expanding customer base in particular—show no signs of slowing as it picks up its international expansion. It’s up to investors, then, to determine whether they feel continued growth in these areas might be reflected in a continued increase in share prices going forward.

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