Nu Holdings Analysis
Chart done on daily timeframe. After a sharp surge this year, Nu Holdings investors are celebrating the stock finally trading above its IPO highs. Thanks to their fast growth in revenue, the stock has consistency moved higher to make new 52 week highs over the past year, but their valuation will come into question again as they get ready to report earnings next month. Nu’s surge has more than doubled its market cap to about 60B, which is a fair valuation considering their revenue in 2023 was above 7B. Being a fairly young company, investors often focus on revenue as the leading indicator of of their survival and long term potential, and with the way Nu’s revenue has grown, this has definitely caught the attention of aggressive buyers. Since 2020, the company has grown its revenue from 650M to last year finishing at 7B, and their first quarter revenue for 2024 grew by a whopping 84%. This reflects strong trends from the company, and their projections match that trend. Nu’s leadership also managed to move the company into a profitable territory in 2023, posting a positive 1.03B in net income, a hard task for a young company. This makes the digital banking company even more attractive to savvy investors looking to take on offshore investments. Looking at their balance sheet, Nu has grown its assets to about 43B, exceeding their liabilities of 37B. Finally, their free cash flow is around 10.7B, giving them leeway to withstand unexpected downturns, and the ability to spend on R&D when needed.
All in all, the company’s growth is remarkable, and their move to all time highs is perfectly justified by the numbers. The only downside is the fact that it’s an offshore company, which usually leaves American investors a bit wary. The one room for improvement for them is there price to earnings ratio, which is currently at 49, far above the healthy 15-25 range. There are only two ways to adjust the number to a more healthy reading, either by increasing profits, or if the stock sees a downside correction. Based on their projections, NU is set to grow their profits by about 50% in the coming three quarters, so that may help adjust their P/E ratio lower without having to see the stock drop dramatically.