A Look At Nu Holdings’ Valuation As Global Expansion And U.S. Bank Charter Plans Advance

Why Nu Holdings’ expansion plans are on investors’ radar

Nu Holdings (NU) has drawn investor attention after outlining a multi year push to expand and upgrade offices across Latin America and other regions, backed by conditional approval for a U.S. national bank charter.

See our latest analysis for Nu Holdings.

Even with the office expansion plans, F1 partnership and conditional U.S. bank charter in focus, Nu Holdings’ recent performance has cooled in the short term, with a 1 month share price return of a 10.26% decline. However, the 1 year total shareholder return of 46.91% and a very large 3 year total shareholder return that is more than triple the starting value suggest that longer term momentum has been stronger than the latest pullback.

If Nu’s recent pullback has you thinking about where else growth stories might emerge in finance and tech, it could be worth scanning our list of 22 top founder-led companies as another way to spot ambitious companies earlier in their journey.

With Nu’s shares down 10.26% over the past month but still showing a 46.91% total return over the past year and trading below the average analyst price target, you might wonder: is there still upside here, or is future growth already priced in?

Most Popular Narrative: 72.7% Undervalued

According to the most followed narrative, Nu Holdings’ fair value of $59.35 sits far above the last close at $16.19, which is a wide gap that naturally grabs attention.

Currently 2.77%+, and has been consistently staying Green. Tomorrow Nu Holdings will be releasing their Quarterly Report. Currently up 29% in the past 3 months, and being backed up by some of The Biggest Names in the Market. Nu Holdings is a digital corporation that engages in Digital Banking. Slowly growing in South America, it has been catching Investors eyes for a long time now. Nu is being mixed on their Earnings Release. However if we get into the technicals of the Market, it is showing that tomorrow will be a Bullish Event. On their last report, it was over a 10% gain. Just as most investors strayed away from SHOP today, based on our signals we made a 15% morning gain. With all of this being said, we Predict NU Holdings as a Beat Tomorrow with the potential for a catastrophic Gain.

Read the complete narrative.

Want to see how a digital bank ends up with a fair value nearly four times the current price? According to DailyInvestors, the story leans heavily on rapid top line expansion, widening margins and a future profit multiple more common in fast growing tech names than traditional banks. Curious which specific revenue growth path and profitability assumptions are doing the heavy lifting in that $59.35 figure, and how long the narrative expects that to last?

Result: Fair Value of $59.35 (UNDERVALUED)

Have a read of the narrative in full and understand what’s behind the forecasts.

However, this fair value story could be challenged if revenue growth at 44.82% or net income growth at 29.05% slow, or if U.S. bank charter conditions limit profitability.

Find out about the key risks to this Nu Holdings narrative.

Another View: Market Ratios Flash A Different Signal

That user narrative points to a big gap between price and fair value, but the market’s own yardsticks tell a different story. At a P/E of 31x, Nu trades well above the US Banks industry at 11.6x, peers at 13.2x, and even above a fair ratio of 22x. In plain terms, you are already paying a premium multiple for this growth story, so the key question is whether you are comfortable paying up when the market could move closer to that fair ratio over time.

See what the numbers say about this price — find out in our valuation breakdown.

Next Steps

If this mix of strong past returns and a premium P/E has you torn, it is worth checking the full picture for yourself and moving quickly to shape your own view. This includes the 3 key rewards and 1 important warning sign that other investors are watching closely.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data
and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your
financial situation. We aim to bring you long-term focused analysis driven by fundamental data.
Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
Simply Wall St has no position in any stocks mentioned.

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