Purchasing Nu Holdings Shares Right Now: A Potential Lifelong Wealth-Building Opportunity?
Investing in a life-changing opportunity doesn't happen overnight. It takes an exceptional company with a long-term growth horizon to truly make an impact. Nu Holdings, symbolized by 'NU' (-0.07%), might just be that company. Operating in Brazil, Mexico, and Colombia, Nu Holdings offers banking and lending services to consumers and businesses in these emerging markets.
These countries have vast potential for growth, with an abundance of cash-dependent individuals lacking modern credit, investing services, and even basic banking facilities like checking and savings accounts. It's an attractive investment proposition, but does the data support this narrative?
A Double-Engine Thrust Driving Substantial Revenue Growth
Nu Holdings has been posting impressive growth numbers. From a $1.2 billion revenue in 2022 to over $7.8 billion in Q3 2024, the company has experienced exponential growth. Driving this growth are simultaneous customer expansion and increasing engagement. In just four years, Nu's customer base has quadrupled to 110 million, and the average revenue per active customer has climbed from $3.50 in 2021 to $11 in Q3 2024.
This trend raises the question of whether this growth will continue. As numbers grow larger, growth might slow, but Nu's lengthy runway and vast market potential suggest years of robust growth ahead. With over 110 million users across three countries of approximately 395 million population, Nu Holdings serves around 28% of this market. In its oldest market, Brazil, Nu Holdings boasts a 56% market share. Since Q3 2023, the company has added an additional 20.7 million users, signaling substantial growth opportunities in new markets.
Latin America is home to 666 million people, and Nu Holdings can significantly expand by entering new countries. Moreover, there are whispers of Nu expanding into entirely new regions, such as the United Kingdom and the United States.
Engagement will also contribute to Nu Holdings' long-term growth. While most individuals in emerging markets still rely heavily on cash, the transition to payment cards and modern lending options can serve as a long-term tailwind for Nu Holdings, as income rises in these developing economies. Nu Holdings' Q3 2024 deposits increased by 48% year over year, with its credit card and loan portfolio expanding by 36%.
Enormous Earnings Growth with an Attractive Price Tag
It's worth noting that Nu remains a growth stock, and its revenue surged by 38% year over year in Q3 2024. Now, earnings are set to follow suit as the business expands at a faster pace than its expenses, delivering operating leverage. Analysts expect Nu to grow earnings by an average of 48% annually over the next three to five years.
Despite this phenomenal growth potential, Nu Holdings still offers a relatively modest price tag. The stock trades at a price-to-earnings ratio of around 33, while its price-to-earnings-growth (PEG) ratio hovers around 0.7. Affordable valuations for growth stocks are often found in the 2-2.5 PEG ratio range, but if Nu can establish its reputation as a blue-chip stock, even a P/E ratio below 33 could present an attractive opportunity.
The Nu Holdings Wager: Can It Set You Up for Life?
Growth stocks can come with elevated risks due to their shorter track records of excellence. However, Nu Holdings appears to be on a promising path, with its dominant position in Brazil and remarkable growth across its entire user base. This financial performance is not just folklore — the bank's strong financials and increasing engagement numbers make it a compelling case for long-term growth.
Banks like Nu Holdings are vulnerable to recessions and economic fluctuations that can impact lending and banking services. However, with so much untapped potential in the Latin American market, Nu is poised to thrive, even in uncertain economic conditions.
If Nu can deliver consistent growth performance for a few years, it could become a life-altering investment opportunity, even if the market slows down or stagnates. Even if growth slows to 20% annually, Nu's valuation is still relatively low, indicating sizeable investment returns for the future.
Investors looking to capitalize on Nu Holdings' growth potential may find it appealing to allocate some of their finance to this company. With a strong financial performance and significant growth in revenue, customers, and engagement, Nu Holdings could be an attractive option for those interested in investing in the finance sector.
Given the company's impressive earnings growth and modest price tag, Nu Holdings presents an opportunity for investors seeking to make a long-term investment in the financial market. Moreover, the company's extensive market potential in Latin America and beyond, as well as its resilience to economic fluctuations, make it an intriguing choice for those looking to add money to their investment portfolio.
