Nu Holdings (NU, Financial) saw its stock fall by 7.38% despite surpassing earnings expectations in its third-quarter report. The Brazilian fintech company delivered impressive sales and earnings, but investor sentiment has been overshadowed by concerns over Brazil's economic conditions, particularly rising inflation and interest rates.
In the latest quarter, Nu Holdings reported earnings per share of $0.11 on revenue of $2.94 billion, beating analyst estimates which forecasted $0.10 earnings per share on $2.6 billion in revenue. This represents a significant 37% increase in revenue and an 81% growth in earnings per share compared to the previous year. Furthermore, Nu Holdings continues to expand its customer base, adding 5.2 million new customers to reach a total of 109.7 million, marking a 23% increase from the prior year. The average revenue per customer also saw a remarkable 25% rise to $11.
Nu Holdings' stock price currently stands at $14.485, with a market capitalization of $69.37 billion. Despite the recent decline, the stock is significantly undervalued according to its GF Value, which is estimated to be $20.37. This suggests that the stock has the potential to rebound in the future. For more information, please visit the GF Value page for Nu Holdings.
However, the company's relative valuation metrics such as a price-to-earnings (PE) ratio of 46.13 and a price-to-book (PB) ratio of 9.99 highlight that Nu Holdings is trading at higher valuations when compared to industry medians. Additionally, the company has issued USD 1.9 billion in debt over the past three years, making its debt levels a point of caution for potential investors, although the debt level is deemed acceptable.
Nu Holdings demonstrates strong financial health, reflected by its comfortable interest coverage that signals its ability to cover interest expenses with its earnings. Moreover, its Beneish M-Score of -2.27 indicates that the company is unlikely to be manipulating its financial statements, further adding to investor confidence in the company's reported figures.
While the fintech continues to exhibit high growth and strong earnings, macroeconomic challenges in Brazil, such as recent hikes in the core interest rate to 11.25% by the Brazilian central bank, present hurdles that could impact future performance. As Brazil targets a 3% inflation rate, further interest rate increases are anticipated, potentially affecting equity valuations and posing challenges for fintech companies like Nu Holdings.
