What makes the ultimate growth stock? Beyond high growth rates, I’d say it has to have long-term growth drivers, be on the cusp of or already demonstrating profitability, have some sort of hedging or resilience, and not be overvalued.
Sounds too good to be true? Check out Nu Holdings (NYSE: NU). Nu is a Brazil-based digital bank that offers a wide array of financial services in three Latin American countries, and it appeals to a broad base of customers through its low rates, easy-to-use platform, and modern technology. It has all this and more.
High growth rates
Quarterly growth rates have been incredibly high for Nu as it adds customers at a fast pace — and these customers are engaging at high rates. Nu added more than 5 million customers in the second quarter, zooming past 100 million for the first time, for a total of 104.5 million. Customers in its headquarters and main market of Brazil are still joining at a healthy clip despite more than half the adult population — 56% — already using the platform, and engagement rates are increasing as well, reaching 83.4% in the quarter.
Average revenue per active user (ARPAC) increased 30% year over year, and it keeps growing sequentially as well on a currency-neutral basis.
Data source: Nu Holdings.
Long-term growth drivers
The bank is still capturing market share in Brazil, and it’s growing even faster in its newer markets of Mexico and Colombia. Mexico added 1.2 million customers in the second quarter for a total of 7.8 million, while Colombia surpassed 1 million in the quarter.
It still has limited services in the countries, and it only recently launched its high-interest savings account that’s attracting new membership. Growth in the Mexico business was the main driver of deposit increases in the second quarter, with deposits there tripling over the past two quarters since launching the savings account. Management says these two markets are still in their “investment phases.”
As Nu picks up more accounts and launches new services, it’s leading to higher engagement and more cross-sells and upsells. That should keep…
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