Some investors place a lot of meaning in the nominal prices of stocks they are considering as investments. They may see a stock under $10 per share and think they have found a bargain.
However, these investors should know that performance per share is the most critical metric. Strategies such as stock splits and buybacks can influence a stock price without affecting a company's business, making the nominal price largely meaningless.
Still, there are some successful stocks out there -- Amazon and Booking Holdings are two examples -- that once traded at single-digit prices. Also, lower nominal share prices allow small-scale retail investors to purchase whole shares more easily. Such factors can make lower-priced stocks worthy of consideration ... in some cases.
To that end, SoFi Technologies (SOFI 3.69%) and Nu Holdings (NU 1.66%) are two stocks currently trading for under $10 a share. Each is on track for significant growth over time and qualifies as a no-brainer stock buy. Here's why.
1. SoFi Technologies
SoFi came to the public markets through a SPAC merger in June 2021. Its past performance likely disappointed those who bought after SoFi's move to the public markets. The current $8.43 per share price is roughly one-third of the $23 per share price at which the SPAC took SoFi public.
Still, this company's ability to drive growth could change one's mind about its stock. The one-time student lender responded to the suspension of student loan payments during the COVID-19 pandemic by acquiring a bank charter and buying tech platforms that have made it an "AWS of fintech." That technology and the bank charter allow SoFi to add financial products without the help of IT companies or banking partners.
As a result of this work, SoFi now claims over 6.2 million members, up from 4.3 million in the year-ago quarter. These customers hold 9.4 million SoFi products (meaning accounts or loans), growing from 6.6 million over the same period.
That rising popularity led to total net revenue for the first two quarters of 2023 of $970 million, a 40% increase year over year. Additionally, reducing its expense growth meant its net loss for the six-month period fell to $82 million. SoFi reported a $206 million loss during the same time frame in 2022.
Moreover, with student loan payments set to resume next month, that could give SoFi the needed boost to turn profitable. The stock price has nearly doubled from this year's lows, partially on the hope that that segment's recovery could lead to a positive and growing net income. With a price-to-sales (P/S) ratio of 4, it could motivate investors to bid it to record highs and beyond.
2. Nu Holdings
Nu Holdings stock sells for $7.23 per share, but do not assume the Brazil-based digital bank is a small company. At a market cap of around $35 billion, the NuBank parent has built a massive presence in its home country.
Admittedly, around 80 million of its 84 million customers are in Brazil, meaning 49% of the adult population holds a NuBank account. Such growth attracted an early investment from Berkshire Hathaway, making it a stock Warren Buffett owns.
Additionally, with growth likely to slow in Brazil, it has expanded into Mexico and Colombia. In those countries, customer counts rose 33% and 133%, respectively, over the previous year, above the 27% increase in Brazil. Even though those countries add up to about 4.3 million customers, their growth rates indicate Nu's business model should work in other Latin American countries.
The success has also translated into improving financials. Nu's $3.5 billion in revenue for the first six months of 2023 rose 71% versus the same time frame in 2022. Moreover, with operating expenses growing at a slower pace, the digital bank earned a net income of $367 million, a considerable improvement from the $75 million loss in the year-ago period.
Where the gains have not translated is to the stock, and despite a surge this year, Nu Holdings stock is well below its $9 per share IPO price from late 2021. But with a P/S ratio of 8 and a rapid growth rate, the performance should eventually justify Berkshire Hathaway's early optimism regarding the fintech stock.
