Here's Why Nu Holdings Stock Is a Buy Before May 13

Great growth stocks rarely go on sale. But that seems to be the case right now with Nu Holdings (NYSE: NU). Most American investors haven't heard of this company, given its Latin American roots. But if you're looking to buy a proven growth stock at a discount, this looks like your chance. There's reason to believe that this buying opportunity won't last long.

Nu Holdings is a growth machine

Nu has an incredible history. The company was founded in 2013 after its founder, a former venture capitalist at Sequoia Capital, identified a huge market opportunity in Latin America. While traveling there on business, he noticed how most countries in the region had consolidated, old school banking industries. Many areas only had a few large incumbents, a competitive dynamic that resulted in low innovation and high fees for simple services. In response, Nu was formed to take these markets by storm.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

Nu's business strategy was simple: Offer low-cost financial services directly through a smartphone app. This way, the company didn't need to build out a huge network of physical branches. That greatly sped up customer acquisition times while keeping operating costs low, savings that were then passed on to customers. Operating exclusively through a smartphone app also allowed the company to innovate quickly. Its offerings began with a simple debit card. But after more than a decade in operation, Nu now offers insurance, banking, credit card services, and much more. When it launched its crypto trading platform in 2022, Nu racked up 1 million users in its first month of operation.

Nu has clearly cracked the code for growth. Since 2013, it has gone from essentially zero customers to more than 100 million. More than half of all Brazilian adults are now Nu customers. Nu has repeated its recipe for growth in other countries like Mexico and Colombia, and there remain hundreds of millions of other Latin American residents who still don't have access to its services, providing a long runway for growth.

Although Nu should continue growing for years, if not decades, to come, the business will still face slowing growth over time. Brazil, Colombia, and Mexico were its best initial countries on paper in terms of demographics, regulatory friendliness, and average income. While the company has done well cross-selling financial services to customers, there are only so many products a single customer can uptake. Therefore, growth will likely be slower in the future, as Nu's historical growth rates prove.

Still, shares are a long-term buy right now for one surprising reason.

NU Revenue (TTM) data by YCharts.

1 reason to buy shares before May 13

While Nu used to be a revenue growth story, the company did achieve profitability in 2023. Since then, profits have scaled impressively, causing shares to trade at just 29 times earnings -- less than the S&P 500 overall.

NU PS Ratio data by YCharts. PS = price-to-sales. PE = price-to-earnings.

On a forward price-to-earnings basis -- that is, based on what Wall Street analysts believe Nu will earn over the next 12 months -- Nu is trading at under 21 times earnings. Yes, revenue growth is declining, but profit growth remains strong. It's hard to imagine Nu trading at 20.6 times earnings next year. In reality, the share price will likely rise to keep that valuation closer to its current level.

Next quarter's results will be released on May 13. If its profit trajectory continues as expected, we could see a rerating of Nu's valuation to reflect that reality, making shares a buy before that date.

Should you invest $1,000 in Nu Holdings right now?

Before you buy stock in Nu Holdings, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Nu Holdings wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $765,576!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of March 3, 2025

Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool recommends Nu Holdings. The Motley Fool has a disclosure policy.