Pieter Slegers — Is Nu Holdings An Interesting Stock?

The setup — and the wrapper

• "Have you ever heard about Nu Holdings? It's a high-growth company that has disrupted the Big Five banks in Brazil. Today, they are the largest digital banking platform in the world outside of Asia."
• Header card: Owner-Operator · $15.0 · $72.5bn market cap · $605m average daily volume · ISIN KYG6683N1034 (a Cayman Islands holding company).
• The source material is a 90-page Deep Dive by community Partner Steven Van Der Burg, offered for download at the end. The post is framed as a growth-investing teaser: "Nu Holdings is the perfect example of a growth stock. You want to learn more about growth investing? You can sign up for Compounding Growth here and immediately receive our 3 favorite growth stocks."

1. Business model

• "Nubank is a digital-first bank with no physical branches. They started with a no fee credit card in Brazil to attract customers away from the high fees of big banks."
• Revenue mix: interest income 86% (card balances, personal loans) and fee income 14% (interchange, premium services). LTM: $16,609.7m interest and $2,730.1m fees, from $318.9m total in 2018 (78.4% and 42.9% CAGRs).
• "Once a customer starts using one of Nubank's offerings, they tend to adopt more of them over time."

The product stack

• Credit cards — the no-annual-fee Mastercard launched in 2014; "over 60 million unique credit card customers in Brazil, representing about 34% of the adult population" by 2024.
• Digital accounts (NuConta / Cuenta Nu) — zero fees, balances earning 100% of CDI in Brazil or ~13% APR in Mexico; cash in and out through partners such as OXXO's 30,000+ Mexican stores; "Cajitas" savings sub-accounts.
• Lending — instant unsecured loans in-app, plus newer secured loans in Brazil against investments, payroll deductions (Consignado) or severance funds (FGTS). "The total loan portfolio reached USD 24.1 billion by early 2025, a 40% increase year-on-year." (The app screenshot shows a Mexican personal loan at a 48.2% total annual cost.)
• Nu Empresas for small businesses (NuTap turns a phone into a card reader; business loans from late 2024), plus NuInvest, NuCrypto (from BRL 1) and NuSeguro insurance.

2. Management — owner-operator

• "David Vélez (CEO) founded the company in 2013 and is the largest shareholder. He holds 75% of the voting rights, and 19% of the company." Co-founder Cristina Junqueira owns 4%.
• "We love to see a founder still leading the company and management with skin in the game like this." Scored 9/10 — the dual-class gap between 19% of the economics and 75% of the votes is not discussed.

3. The moat — cost and brand

• "Because they have no branches and use modern cloud technology, it costs Nu less than $1 per month to serve a customer, while traditional banks spend over $4."
• "People love the brand so much that 80-90% of new customers join through free word-of-mouth referrals… Their Net Promoter Score is near 90, which is unheard of in banking."
• A proprietary credit engine (NuX) "allows them to safely lend to people that traditional banks often ignore"; one app "creating low switching costs" and easy cross-sell.
• The evidence offered: customers 3m (2017) → 33.3m (2020) → 93.9m (2023) → 131m (2025) → 138.9m LTM. Scored only 7/10.

4-5. End market and risks

• "The retail profit pool in Brazil, Mexico, and Colombia is estimated at $140 billion." Those markets are ~60% of Latin America's population and 66% of its GDP, "still dominated by inefficient oligopolies with high fees."
• Three risks: macro sensitivity ("High inflation or unemployment in Latin America could cause loan defaults to spike"), MercadoLibre ("Mercado Pago… is a big threat, especially in Mexico") and regulation ("Governments could cap interest rates or change banking rules at any time"). The score table adds "operating in emerging markets" and "unsecured loans" — 6/10.

6. Why the usual balance-sheet tests are thrown out

• "For Nubank, we don't use regular quality metrics like Interest Coverage or Net Debt/FCF. These are great for most companies, but they don't work for banks."
• "Interest Coverage: Interest is usually a cost. For a bank, interest is income." "Net Debt/FCF: In banks, we want to see a lot of 'debt' in the form of customer deposits. Using Net Debt to analyze a bank would make every bank in the world look like a terrible investment." Goodwill/assets is "less critical" because growth is organic.
• The replacements: loan-to-deposit 58% ("conservative"), CET1 20% against "about 8.75%" required in Brazil, and 90+ NPLs 6.8% — "healthy for a bank that focuses on people who are often ignored by traditional banks." The NPL slide runs 4.7% (Q3'22) → 7.2% (Q3'24) → 6.8% (Q3'25). Balance sheet 9/10.

7. Capital intensity — efficiency ratio

• "Efficiency Ratio = Operating Expenses ÷ Total Revenue. Nubank has an efficiency ratio of 27%. This is much lower than the traditional banks, which run around 40% to 50%."
• The IR slide shows the path: 58.2% (Q2'22) → 35.4% (Q2'23) → 29.9% (Q4'24) → 27.7% (Q3'25), on quarterly NII + fees rising from $750m to $2,897m while costs went from $436m to $802m.
• The caveat that holds the score to 6/10: "as they grow their loan book, they must hold back a larger portion of capital as a buffer to maintain a safe LDR and CET1."

8-10. Returns, profitability, dilution

• ROE 31.6% (✅ >20%): −20% (2019), −32.6% (2020), −6.8% and −7.8% (2021-22), then 18.2% → 28.1% → 30.3% → 31.6%. "We don't look at ROIC for a bank… customer deposits are debt, and the interest is income."
• Net margin 42.8%; net interest income $11,131.4m LTM (76.9% CAGR); "The NIM around 20% is much higher than traditional banks, which tend to run around 3% to 4%."
• SBC 9.8% of net income (✅ <10%): $353.8m LTM against $3,607.1m. "Management canceled a large award program in 2022 to limit dilution" — the $608.8m SBC year. 7/10.

11-12. Growth, past and expected

• Revenue 75.9% 5-yr CAGR ✅; EPS CAGR ❓ — "Nu Holdings has only been profitable since 2023." Net income: $1,030.5m (2023) → $1,972.1m → $2,868.9m (2025) → $3,607.1m LTM.
• "Nu's plan is to go global. They plan to launch in a new country outside Latin America by the end of 2025. They are also expanding into the Southern US." (A forward-dated sentence in a September 2026 post.)
• Consensus: 32.4% revenue and 37.5% EPS CAGR over two years. Outlook 9/10.

13. Valuation — the three methods

• Forward P/E: "Nu trades at a forward PE of 16.4x compared to a recent average of 22.7x" — the low end of a range that ran ~34x in 2024 and ~14x in mid-2026. Against incumbents: Itaú 8.7x, Bradesco 6.3x.
• Earnings Growth Model: 15% EPS growth + 0% yield ± 0% multiple change = 15.0% — "attractive. This would mean you double your money every 5 years."
• Reverse DCF: "We'll use Net Income because FCF isn't the best measure for a bank." $2,776m NTM net income less $353.8m SBC = $2,442.2m, discounted at 10% with 3% terminal growth → 14.8%/yr implied for ten years; "could be reasonable based on how fast Nu has been growing." The terminal value is ~64% of the $75.0bn equity value.
• Verdict: "Nubank's valuation could be reasonable as long as it keeps growing at high rates, and the multiple doesn't come down significantly." 7/10.

14-15. Owner's earnings and shareholder returns

• Owner's-earnings CAGR ❓ — "Nu went from net losses ($165M in 2021) to serious profits (around $3.6B over the last 12 months). But the company has only been profitable for 3 full years."
• "YTD: -11.9%. CAGR since IPO in 2021: 9.1% (CAGR since IPO > 12%? ❌)." The total-return chart: +51.3% from 9 December 2021 to 4 September 2026, after a drawdown of roughly 60% in 2022 and a January 2026 peak around +110%.
• Both rows scored 7/10 despite being unanswerable or failed.

Quality Score and conclusion

• Total Quality Score 7.6/10: business model 8 · management 9 · moat 7 · industry 7.5 · risks 6 · balance sheet 9 · capital intensity 6 · capital allocation 8 · profitability 8.5 · SBC 7 · historical growth 7.5 · outlook 9 · valuation 7 · owner's earnings 7 · value creation 7 (sum 114.5 ÷ 15 = 7.63).
• "Nu Holdings is growing quickly · They operate at a world-class efficiency · High ROE · A capital light structure. But as Nu Holdings keeps growing, they will need to retain more and more capital. The main risk probably is the competition from MercadoLibre's FinTech segment."
• Context from this archive: 7.6 sits below CMG.TO's 8.3 and the HEICO pass at 7.8, and there is no "At which price are we interested?" line of the kind the Shopping List issues end on.