Over the past six months, Nubank’s shares (currently trading at $12.43) have posted a disappointing 14.2% loss, well below the S&P 500’s 7.5% gain. This might have investors contemplating their next move.
Following the drawdown, is now the time to buy NU? Find out in our full research report, it’s free.
Why is NU a good business?
With well over one hundred million customers across Brazil, Mexico, and Colombia through its viral member-get-member referral program, Nubank (NYSE: NU) is a digital banking platform that offers financial services including spending, saving, investing, borrowing, and protection products to millions of customers across Latin America.
1. Skyrocketing revenue shows strong momentum
Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but many enduring ones grow for years.
Luckily, Nubank’s revenue grew at an incredible 84.8% compounded annual growth rate over the last five years. Its growth surpassed the average financials company and shows its offerings resonate with customers.
2. Outstanding long-term EPS growth
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Nubank’s full-year EPS flipped from negative to positive over the last four years. This is a good sign and shows it’s at an inflection point.
3. Market-beating ROE showcases attractive growth opportunities
Return on equity, or ROE, tells us how much profit a company generates for each dollar of shareholder equity, a key funding source for financial firms. Over a long period, financial firms with high ROE tend to compound shareholder wealth faster through retained earnings, buybacks, and dividends.
Over the last five years, Nubank has averaged an ROE of 15.9%, healthy for a company operating in a sector where the average shakes out around 10% and those putting up 25%+ are greatly admired. This shows Nubank has a decent competitive moat.
Final judgment
These are just a few reasons why we think Nubank is an elite financials company. With the recent decline, the stock trades at 13.1× forward P/E (or $12.43 per share). Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
Stocks we like even more than Nubank
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