Shares of Nu Holdings (NU 1.66%) stock moved 29% higher in February according to data provided by S&P Global Market Intelligence. Investors were pleased with the progress reported in the 2023 fourth-quarter update, and they're excited about what the future holds.
Sustaining incredible momentum
Nu has been reporting incredible results pretty much since going public. It's an all-digital bank based in Brazil, and it's focused on low-fee, easy-to-use products and services. These have become extremely popular, and Nu is growing by leaps and bounds. It has also expanded to Mexico and Colombia, which are both still small parts of the business but growing quickly.
It added another 4.8 million customers in the 2023 fourth quarter for a total of almost 94 million, with 53% of the adult population in Brazil as account holders. The activity rate increased to 83%, which means it has an engaged customer base. Revenue increased 57% year over year, and net income increased almost 500% to $361 million.
Average revenue per active customer increased 23% year over year to $10.6, but cost to serve per active customer remained stable at $0.90. Nu is growing efficiently, converting customers to more products and services, such as credit cards and investing, without increasing its own costs. That's leading to scale and profitability.
The credit business is equally robust. Deposits increased 38% over last year to $23.7 billion, with the total interest-bearing portfolio up 49%. Net interest income rose 85% over the last year to $1.3 billion, while net interest margin expanded from 13.5% to 18.3%.
There are still risks for Nu. It's still fairly young and growing, and it operates in a region that is known for economic instability. Brazil's inflation and interest rates have been higher than in the U.S. Nu's management throughout this period, though, should give investors a boost of confidence.
The Latin American bank of the future
Nu has incredible potential as it continues to capture market share. It's still growing in Brazil, and it has barely cracked open its newer markets. Its successful expansion into Colombia and Mexico bodes well for any potential future new markets.
Nu stock is up 127% over the past year, but investors shouldn't feel like they've missed the boat. Nu stock trades at a forward price-to-earnings ratio of only 18, which is a great deal on a high-growth stock. It has a long growth runway, and now is a great time to buy as shares continue to climb.
