If you’re tired of sifting through slow-growth fintech stocks in the United States, you might want to give it a try Now Holdings (NYSE: NOW) for size. The parent company behind Brazil’s Nubank has turned heads since it launched a decade ago and went public three years ago.
There are some legitimate concerns about valuation and geopolitics, but can the risks be worth the potential market-boosting returns? Let’s move south and explore two reasons why you might consider Buy Now Like There’s No Tomorrow.
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Now has come a long way in a short time. It officially launched in Brazil in 2014, introducing a credit card that targeted the country’s huge unbanked population. It has even caught on with the banks. A whopping 56% of the country’s adult population now has a Nubank credit card, and the plastic isn’t just getting buried in wallets and purses. The monthly activity rate is a whopping 84% of the user base.
This is no longer just a Brazilian growth story. Now introduced its digital, branchless bank in Mexico and Colombia a few years ago. The customer base has grown by 23% in the past year to 109.7 million. The company itself is growing even faster. Sales rose 58% on a currency basis, or 38% in the more relevant US dollars for investors in the United States, to $2.9 billion in the latest quarter. The bottom line is growing even faster. Adjusted profit shot up 67% to $592 million in the third quarter reported earlier this month.
Revenue growth is a given for a company early in the disruption process. It’s the earnings story that’s more remarkable. Now became profitable almost two years ago and the company has continued to expand since then. It has managed to increase its margins despite introducing new products and investing in emerging areas. Now trading for 32 times this year’s expected earnings and 22 times next year’s target. It’s a steep multiple for financial services, but Nu’s stellar growth and long runway make it an attractive morsel for risk-averse investors.
Now it reached a record high on November 12. Two days later, it would take a small step back after apparently posting strong results. A day later, news would surface that Warren Buffett’s Berkshire Hathaway had sold part of his interest in Nu for the first time in more than three years of ownership.
