Nu Holdings: High Multiples Mask A Rare Deep Value Fintech

Nu Holdings (NU) delivered strong Q2 2025 results, reporting 122.7 million customers, 40% YoY FXN revenue growth to $3.67 billion, and $637 million in net income, achieving a 28% ROE. Despite current high valuation multiples, the company is positioned as a 'deep value fintech' due to projected 30-40% annual EPS growth, expected to compress its forward P/E to 15x by 2027. Strategic developments, including the appointment of former Brazilian Central Bank president Roberto Campos Neto to the board and significant expansion in Mexico, reinforce its regulatory standing and growth trajectory, leading to a maintained 'Buy' rating for medium- to long-term investors.

Analysis

Nu Holdings (NU) delivered strong Q2 2025 results, reinforcing its 'deep value fintech' thesis with robust growth and expanding profitability. The company grew its customer base to 122.7 million, achieving a 40% YoY FX-neutral revenue increase to $3.67 billion and a net income of $637 million, resulting in an impressive 28% ROE. Key operational metrics underscore its scalability, with ARPAC rising 18% to $12.2 while the cost per client remained at just $0.8. While current valuation multiples like its 33.6x P/E TTM are significantly above the financial sector average of 13x, the company's projected 30-40% annual EPS growth is expected to drive a rapid P/E compression to 15x by 2027. This growth trajectory, combined with strategic catalysts such as the appointment of former Brazilian Central Bank president Roberto Campos Neto to its board and strong market penetration in Mexico (12 million customers), strengthens its competitive moat. Peer comparison places NU in a unique position, offering substantially higher growth than traditional banks like ITUB and BBD, and a more balanced, scalable model than fintech peers like STNE and MELI.

Key Decisions for Investors

• Investors with a medium to long-term horizon should consider the stock's premium valuation as justified by its projected 30-40% annual EPS growth and a clear path to P/E multiple compression, which supports the 'Buy' thesis.
• It is crucial to monitor the execution of key growth drivers, including the sustained momentum in Mexico, the ability to maintain a low cost-per-client below $1.0, and trends in asset quality, particularly the 90+ day NPL ratio which recently edged up to 6.6%.
• The addition of a former central bank president to the board is a significant de-risking event on the regulatory front, providing a strategic advantage that should be factored into assessments of the company's long-term stability in the volatile Latin American market.