Over the past six months, Nubank’s shares (currently trading at $14.06) have posted a disappointing 19.7% loss, well below the S&P 500’s 8% 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 Are We Positive on NU?
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
A company’s long-term sales performance is one signal of its overall 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 88.5% 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
Analyzing the long-term change in earnings per share (EPS) shows whether a company’s incremental sales were profitable — for example, revenue could be inflated through excessive spending on advertising and promotions.
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 (ROE) measures how effectively financial firms generate profit from each dollar of shareholder equity — a critical funding source. High-ROE institutions typically compound shareholder wealth faster over time through retained earnings, share repurchases, and dividend payments.
Over the last five years, Nubank has averaged an ROE of 14%, 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 one of the best financials companies out there. After the recent drawdown, the stock trades at 14.3× forward P/E (or $14.06 per share). Is now a good time to initiate a position? See for yourself in our in-depth research report, it’s free.
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