Key Takeaways:
- The 2-Minute Valuation Model values Nu Holdings stock at $20 per share in 2 years.
- That’s a potential 80% upside today for $NU.
- The stock is trading near its lowest P/E valuation multiple of all time.
- Get accurate financial data on over 100,000 global stocks for free on TIKR >>>
Investors are increasingly turning their attention to Nu Holdings (NU), the rapidly growing Latin American fintech company revolutionizing banking in underserved markets.
Despite already delivering impressive returns, our analysis suggests the stock still has significant upside potential.
Nu Holdings provides digital banking services to millions of customers across Brazil, Mexico, and Colombia through its innovative app-based platform.
Over the years, Nu has rapidly expanded its user base while improving profitability metrics.
Here’s why the stock could deliver substantial returns in the coming years.
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What is the 2-Minute Valuation Model?
Three core factors drive a stock’s long-term value:
- Revenue Growth: How big the business becomes.
- Margins: How much the business earns in profit.
- Multiple: How much investors are willing to pay for a business’s earnings.
Our 2-Minute Valuation Model uses a simple formula to value stocks:
Expected Normalized EPS * Forward P/E ratio = Expected Share Price
Revenue growth and margins drive a company’s long-term normalized earnings per share (EPS), and investors can use a stock’s long-term average P/E multiple to get an idea of how the market values a company.
Is Nu Holdings Stock Undervalued?
Forecast
Based on analyst estimates in the EPS growth chart, Nu Holdings is expected to dramatically increase its normalized earnings per share over the next few years.
By the end of 2027, analysts project the company will reach $1.15 in EPS, representing strong growth from current levels.
For our valuation, we’ll use a more conservative EPS estimate of $1.00 for 2027 to build in a margin of safety.
This expected earnings growth is driven by:
- Continued user acquisition across Latin America
- Expansion of financial product offerings
- Improving operational efficiency and economies of scale
- Higher revenue per user as customers adopt more services
View $NU’s full analyst estimates >>>
Valuation Multiple
Nu Holdings has historically traded at an average forward P/E multiple of 25.38x, as shown in the historical P/E chart. The stock has traded as high as 31.5 times earnings and as low as 18.2 times earnings over the past year.
Currently, Nu Holdings trades at approximately 20 times forward earnings, which is below its historical average. This suggests the stock may be undervalued compared to its trading history.
To remain conservative, we’ll use a forward P/E multiple of 20x in our valuation, which is where the stock is trading today.
Fair Value
Using our 2-Minute Valuation Model and applying a conservative approach:
- Conservative 2027 EPS estimate: $1.00
- Conservative forward P/E multiple: 20x
- Expected share price in 2 years: $20.00
The stock currently trades at around $11.09, which implies a potential upside of approximately 80.3% over the next two years, or an annualized return of about 34.3%.
Analysts’ Price Target
Analysts’ most recent consensus price target suggests further upside for Nu stock, though our long-term model shows even greater potential than near-term analyst targets.
Today, analysts think the stock has about 30% upside.
Analysts have historically seen around 30% upside for the fintech stock, as shown in the Target Stock Price vs. Current Share Price chart.
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Risks to Consider
While our valuation suggests a significant upside, there are several risks to consider:
- Intense competition in the fintech space
- Regulatory challenges in Latin American markets
- Currency fluctuations affecting international investors
- Potential economic headwinds in key markets
TIKR Takeaway
Nu Holdings presents an attractive opportunity for investors seeking exposure to the rapidly growing Latin American fintech market.
With strong projected earnings growth and a reasonable valuation multiple, the stock could deliver returns of over 80% in the next two years.
Is Nu Holdings a buy over the next 24 months? Use TIKR to check the stock’s 5-year growth forecasts to see if it looks undervalued today.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
