NU Stock Surges 19% in a Month: Should You Buy, Hold, or Sell?

Nu Holdings Ltd. NU has delivered impressive performance over the past month. Its stock has surged 19%, significantly outperforming the industry‘s growth of 7.5%.NU’s peers have shown contrasting performances. Banco Santander (Brasil) S.A. BSBR gained 12%, while SoFi Technologies SOFI declined 2% during the same period.Image Source: Zacks Investment ResearchConsidering the current strength of NU shares, investors may wonder if now is the right time to invest in the stock. Let’s delve deeper.NU: Disrupting Banking Across Latin AmericaAs a trailblazer in the fintech industry, Nu Holdings leverages a digital-first and scalable business model to drive down operational costs while boosting efficiency. This innovative approach has positioned NU as a disruptor in traditional banking, enhancing financial inclusion and accessibility across its markets. NuBank, NU’s flagship platform, has earned recognition as one of Latin America’s most trusted and prominent brandsIn Brazil, a market dominated by traditional banking giants, NU has carved out a distinct identity with its innovative cost structure and customer-centric model. Its customer base continues to grow at an impressive pace, propelled by its digital-first strategy. The company is also making substantial strides in expanding its operations across Latin America, particularly in Mexico and Colombia, where adoption is accelerating. With opportunities to penetrate untapped regions, NU’s footprint is poised to expand further. During the third quarter of 2024, the company added 5.2 million customers, bringing its global customer count to 109.7 million. The increasing trend toward digitization is expected to sustain and enhance this growth trajectory.NU’s revenue model is highly diversified, encompassing streams such as lending, interchange fees and marketplace services. This diversification not only mitigates risks but also provides stability during economic uncertainties. The company has consistently demonstrated robust revenue growth, driven by higher monetization of its platform and increased user engagement. Key areas like credit cards and personal loans have significantly contributed to its financial success. In the third quarter, NU reported a remarkable 56% year-over-year increase in revenues.NU’s Strong Returns on CapitalReturn on equity (ROE), a measure of profitability, reflects how effectively a company uses its shareholders' investments to generate earnings. NU’s trailing 12-month ROE is 28.7% compared with the industry’s average of 10.8%.Image Source: Zacks Investment ResearchNU has also shown strong returns on invested capital (ROIC), with a trailing 12-month ROIC of 12.5%, well above the industry average of 4%.Image Source: Zacks Investment ResearchNU’s Promising Top and Bottom-Line GrowthThe Zacks Consensus Estimate for NU’s 2024 earnings is pegged at 42 cents, indicating 75% growth from the year-ago level. Earnings in 2025 are expected to increase 39% from the prior-year actuals. The company’s sales are expected to grow 47% and 35% year over year, respectively, in 2024 and 2025.NU Looks PriceyNU stock appears significantly overvalued compared to industry peers, currently trading at 22 times forward earnings, more than double the sector's average of 10 times. This substantial premium reflects the market’s optimism about NU’s growth potential, driven by its innovative fintech model, expanding customer base, and strong revenue trajectory. However, such a lofty valuation also introduces risks, as any shortfall in earnings or slower-than-expected growth could lead to a sharp correction.High Prospects, But Timing is KeyGiven Nu Holdings’ recent surge, the stock appears to be trading at a premium compared to industry peers. While NU’s innovative fintech model, robust customer growth and strong financial performance justify its valuation, the current price levels may limit near-term upside potential. Investors should consider holding existing positions to capitalize on long-term growth prospects, particularly as NU expands across Latin America and continues to monetize its platform. However, new investors may want to wait for a pullback or consolidation before entering, as the stock’s recent rally may have already priced in near-term optimism.NU currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Zacks' Research Chief Names "Stock Most Likely to Double"Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.This top pick is among the most innovative financial firms. With a fast-growing customer base (already 50+ million) and a diverse set of cutting edge solutions, this stock is poised for big gains. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Nu Holdings Ltd. (NU): Free Stock Analysis Report Banco Santander Brasil SA (BSBR): Free Stock Analysis Report SoFi Technologies, Inc. (SOFI): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks