Nu Holdings Ltd. (NU)

By both methods, the value today (DCF $37 · Multiples $26) exceeds the market price ($16).

Today — fairly valued: at $16 trades ~37.5% below its value discounted to today (~$26); the discount is positive but does not reach the margin of safety we require (≥38%).

At 5 years — Infravalorado: the target price ($32) plus dividends yield above the required average return (10%) — the business compounds.

The bridge: the return at 5 years exceeds the risk-free rate (4.5%) — but the discount does not reach the required margin of safety (≥38%). To require a 15% annual return, it would need to be bought at ~$16.

Educational / informational. Does not constitute investment advice.

The inverse approach: instead of projecting growth to obtain the value, the market price ($16) is taken as given and it solves for what annual owner-earnings growth would need to hold for 5 years for the present value —at the method's rate (4.5%, no-growth terminal)— to equal that price. It is the disconfirmation test: the expectations the price already pays for, contrasted against the method's projection.

The market discounts less growth (4.4%/year) than we project (25.0%/year) → if the base case holds, there is margin: perception is more pessimistic than the estimated reality.

That growth implies ~$3.6 bn of owner earnings in year 5 (vs ~$8.8 bn of our base case). It recalculates if the DCF assumptions are edited.

A bank is valued on equity (P/E × common earnings + price/tangible book), not EV: deposits and debt are funding. It returns capital via dividend + buyback —the buyback reduces the share count, so earnings per share grow faster than aggregate earnings—. Total return adds the dividend collected along the way. In edit mode, the metric, shares, dividend, and exit multiple can be adjusted.

Nu files annual statements on Form 20-F and its quarters on 6-K with no tagged data, so year 0 is the fiscal year ended 31-Dec-2025 and not a rolling twelve-month window. Equity is valued on earnings per share and a multiple, the convention for a lender: deposits and debt are funding for the operation, not capital structure, so no enterprise-value-to-equity bridge is built and cash does not accumulate separately —it is redeployed into the loan book—. The revenue path is anchored to the constant-currency growth the company declares for the second quarter of 2026, not to the growth reported in dollars, which is inflated by the appreciation of the real. Tangible book value per share grows through full retention of earnings: the company pays no dividend.

Today's multiple compresses on its own going forward as the metric per share grows (accelerated by the buyback, which reduces the share count). The exit multiple at 3 years is higher than the terminal at 5 years —at 3 years there is more growth still ahead—. Total return adds the dividend collected; the required return is applied to the base scenario.

They are valued separately, with their own rationale, and are not incorporated into the base or the verdict (they are excess return). When assigning them value — in Editmode —, the total with optionalities updates live, without moving the base.

The verdict, the base CAGR, and the margin of safety are always calculated on the base; optionalities do not alter them (with optionalities at $0 they do not move).

Each card fixes a required annual return and answers: if the business is worth $32 in 5 years, what is the maximum that can be paid today to obtain that return? Since it now trades at $16, the margin of safety is how much cheaper the market is than that maximum. The three thresholds: 4% covers inflation (the floor), 10% is the long-term average return, and 15% is the level of a great investment.

With a target price of $32 in 5 years and a required return of 4.5% annually, the maximum to pay today is $26. Against the current market price ($16), the margin of safety is 37.5% (trades below the maximum → there is margin) and the total return at that price would be 14.8% annually.

• Method. Earnings per share and an exit multiple, the metric for a lender: funding is already netted within earnings.
• Exit multiple. 15 times, the top of the archetype's 10 to 15 band; not to be exceeded given leverage, the cycle, and forward-provisioning.
• Entry multiple. 27× on fiscal year 2025 earnings: growth is being paid for, and the entry point cheapens on its own if the business compounds.
• Estimated return. +15% annually over five years at the market price, against +15% in the adverse scenario.

• Return on capital. Return on tangible equity of 26.3%, with the company reporting a 33% annualized return on equity in the second quarter of 2026.
• Reinvestment runway. Share close to 5% of the addressable retail banking market in Brazil, Mexico, and Colombia.
• Predictability of results. Earnings depend on the expected-loss provision, which anticipates deterioration and makes quarterly results uneven.
• Quality of funding. Local-currency deposits originated organically, without intermediaries or brokers, totaling US$45,328 million as of June 2026; wholesale funding is limited —borrowings and repurchase agreements equivalent to close to 12% of deposits.

Annual levels from the official filing (10-K); the % over each bar is the year-over-year (YoY) growth vs the prior year.

Nu's engine is volume by price: customers times products per customer times monthly revenue per active customer. The credit portfolio and deposits measure the two legs of the balance sheet —where capital is deployed and what funds it— and their relationship indicates how much origination headroom remains. Purchase volume measures the transactional activity that generates interchange fees and feeds the credit engine with data.

The % are the annual (year-over-year) growth: each year —historical and projected— vs the prior one; the TTM (trailing 12m) vs the TTM of a year ago, to avoid overlapping windows. The historicals are exact figures from the official filings; the projected years come from the year-by-year model (the intermediate years without their own series are interpolated between the anchors). The projected columns (+1y…+5y) are 12-month windows counted from the TTM close (31-dic-2025): the projection starts from the most recently reported data, not the fiscal year. The projected base is realistic and unbiased — the risk discount is applied at the end, via the required return. The rationale for each metric is in the (i).

• Customer growth. From 114.2 million to 131.0 million in 2025 and to 139 million in June 2026, with an 83.4% activity rate.
• Revenue per customer. From US$11.3 to US$13.3 monthly per active customer in 2025 and to close to US$17 in the second quarter of 2026.
• Currency component. The 50.3% reported in the second quarter of 2026 was 39% at constant currency: part of the growth in dollars is not organic.
• Deceleration. The path moves from 38% to 16% over five years; sustaining the high end depends on Mexico and Colombia.

• Recurrence and relevance in ten years. Primary bank account of 131 million people, with four products per active customer and 0.1% monthly net churn.
• Differentiated product. Credit is a homogeneous product, but the experience and the price the cost structure enables are not.
• Pricing power. Limited by competition in unsecured credit; the real lever is cost, not price.
• Operating leverage. Efficiency ratio of 19.5%: each additional dollar of revenue reaches the bottom line with very little associated cost.
• Behavior in recession. No history of a severe recession as a scale platform; an unsecured retail lender is among the first to feel one.

• ✓Capital adequacy (CET1)CET1 13.0% (+2.5pp above the minimum)
• ✓Reserve coverage (allowance / loan book)16.90% of the loan book
• ✕Credit quality (net charge-off rate)8.50% annually
• ✓Value creation (ROTCE − 10% bar)+16pp
• ✓Funding (deposit base)Deposits $41.9 bn

A traffic-light interpreted by the method (not generic): float (negative WC) adds up, capex is judged by incremental ROIC (malinvestment test), and a lender is not subjected to corporate solvency. The (i) shows the derivation of each number.

ⓘ Has a loan book: credit health (delinquency, coverage, normalized CECL, RoA/RoE) is evaluated separately, not with corporate solvency.

• Capital. Common equity tier 1 ratio of 13.0% in the Brazilian conglomerate, with a surplus margin of US$1,890 million above the required minimum.
• Funding. Deposits of US$41,925 million at year-end 2025 against assets of US$74,894 million, entirely originated organically.
• Delinquency. 90+ day delinquency ratio of 6.6% in December 2025 and 6.9% in June 2026, partly from seasonality and an intentional expansion into higher-risk segments; the leading 15-to-90-day indicator improved 16 basis points to 4.8%.
• Provision. Cumulative expected loss of US$6,642 million as of June 2026 on a portfolio of US$39,400 million.

How cash comes in and how it is deployed. In green, the business's own cash (the owner-FCF it generates and reinvests); in gray, the float and credit — customer and funding money, which is not the shareholder's.

In fiscal year 2025 the entirety of earnings was retained to fund growth of the credit portfolio and regulatory capital across the three geographies: there was no dividend and no buyback. In the first half of 2026 the company carried out its first buyback, of US$500.4 million, a marginal amount relative to earnings generated in the same period, so a share-reduction path is not modeled.

Who owns the shares — the alignment and whether there is a controlling shareholder.

• Founder at the helm. Chairman and chief executive since founding in 2013, with the corporate control and long horizon that allows.
• Reinvestment. Retains the entirety of earnings and reinvests it in the portfolio at returns on capital far above the 10% bar.
• Governance. The 88.3% of Class B shares held by the founder concentrates close to 74.4% of voting power and limits the influence of the rest.
• Shareholder return. No dividend, and a first buyback of US$500 million in the first half of 2026, marginal relative to earnings generated.

• Emerging-market discount: it trades in New York but one hundred percent of the operation is in Brazil, Mexico, and Colombia. It is the textbook case of missing buyers from operating in a country different from where it is listed, with country risk and the Brazilian reference rate as a permanent filter on demand for the stock.
• The market is pricing in ahead of the credit-cycle deterioration: the 90+ day delinquency ratio rose to 6.9% and the expected-loss provision reached US$6,642 million in June 2026. The price discounts that this deterioration continues, while the 12.4% risk-adjusted financial margin and the 19.5% efficiency ratio show the unit economics still absorb the delinquency.
• The company acknowledges short-term pressure on operating costs from international expansion: the efficiency ratio rose from 17.6% to 19.5% in the second quarter of 2026, attributed partly to real-estate and marketing spend and partly to continued investment in Mexico and Colombia. The filing does not publish results by country, so it is not possible to quantify how much of that expansion subtracts from consolidated earnings, but the direction of the effect is consistent with growth investment, not weakness in the mature Brazilian business.
• Growth reported in dollars is read as inflated by the exchange rate and discounted in full, when the company reports 39% at constant currency in the second quarter of 2026 against the 50.3% reported: the organic component remains high.

The source of the opportunity is not a one-off fact but structural: operating entirely in Brazil, Mexico, and Colombia while listed in New York, which filters demand for the stock through country risk and the Brazilian reference rate, beyond how the business itself is performing. There are also events after the fiscal year-end that the annual filing does not contain and that are disclosed: the launch of the bank in Mexico in August 2026 with 16 million customers, the full banking license in Brazil, the Croma offering for the higher-income segment, and the proprietary NuFormer model.

The annual return (CAGR at 5 years) in each scenario, with the total period return below — the margin of safety made visual: upside range wide, downside range narrow.

Even in the bear scenario, the return holds at -9%/year (-36% total): the margin of safety protects the downside. The bull (+22%/year, +175% total) exceeds it comfortably — a favorable asymmetry, with a narrow downside range and a wide upside range.

• Credit cycle. The absolute delinquent balance grows with the portfolio and the provision anticipates deterioration, compressing results before the loss appears.
• Exchange rate. It earns in reais and trades in dollars: the tailwind that pushed reported growth can reverse.
• Voting concentration. Close to 74.4% of voting power held by the founder through Class B shares.
• Regulation. Three distinct regulatory frameworks, with tightening capital and liquidity rules and pending authorizations in Mexico and the United States.
• Competition. Traditional banks and digital platforms replicate the products and compress the price of unsecured credit.

Each thinker's analytical framework applied to our data.

• Buffett / Graham Quality + margin of safety

  A wide moat and ROTCE 26% above the 10% bar, but the margin is limited (+37%) → excellent business at a fair price.

• Peter Lynch Growth at a reasonable price (GARP)

  A hyper-growth growing 25% at a PEG of 1.1 → cheap for its growth.

• Joel Greenblatt Cheap and high-return (Magic Formula)

  Not applicable — the Magic Formula excludes financials and regulated businesses (EBIT/EV does not capture the operating leverage).

• Howard Marks Perception vs reality + cycle

  The price discounts 4% vs our 25%: perception is more pessimistic than reality, with an identified source of the discount.

• Seth Klarman Capital protection (bear scenario)

  Bear-scenario floor -9%/yr over 5y (material loss) → risk of permanent capital loss.

• Pat Dorsey Moat strength (Five Rules)

  A wide moat, widening; sources: cost advantage, efficient scale, switching costs, intangibles, network effects → passes the Five Rules.

• Aswath Damodaran Expectations implied by the price

  Justifying the price requires discounting 4%, within what we project (25%) — the story squares with the numbers.