Does Recent 49.5% Rally Signal New Momentum for Nu Holdings in 2025?

• If you have ever wondered whether Nu Holdings is a smart buy or if its recent buzz is justified, you are in the right place.
• Over the past year, the stock has gained 14.2% and shot up an impressive 49.5% year-to-date. This indicates renewed confidence and plenty of momentum in the market’s eyes.
• Recent headlines have spotlighted the company’s expansion efforts throughout Latin America, as well as strong customer acquisition numbers. Both factors have stoked investor optimism and could be fueling the latest price surge. The conversation around Nu Holdings is increasingly focused on its growth narrative and its ambitious plans for regional market share.
• Despite the excitement, Nu Holdings gets a valuation score of 0 out of 6 on standard undervaluation checks. This means traditional metrics may say it is fully valued or even expensive, but there is more to the story than numbers alone. Up next, we will dive into how value is assessed for companies like Nu Holdings, then wrap up by revealing a smarter way to gauge what the market might be missing.

Nu Holdings scores just 0/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Nu Holdings Excess Returns Analysis

The Excess Returns model evaluates a company based on its ability to generate returns above the cost of equity, focusing on key metrics such as return on equity and sustainable earnings over time. This approach helps highlight whether a business is creating real value for shareholders beyond the basic investment cost.

For Nu Holdings, the analysis presents the following:

• Book Value: $2.18 per share
• Stable EPS: $0.96 per share (based on weighted future Return on Equity estimates from 9 analysts)
• Cost of Equity: $0.37 per share
• Excess Return: $0.59 per share
• Average Return on Equity: 30.50%
• Stable Book Value: $3.15 per share (source: 6 analysts)

According to these calculations, the intrinsic value estimate for Nu Holdings using the Excess Returns model is $10.15 per share. Currently, the stock is trading at a level that implies a 56.6% premium to its intrinsic value, which signals substantial overvaluation according to this methodology.

Result: OVERVALUED

Our Excess Returns analysis suggests Nu Holdings may be overvalued by 56.6%. Discover 918 undervalued stocks or create your own screener to find better value opportunities.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Nu Holdings.

Approach 2: Nu Holdings Price vs Earnings

When analyzing the valuation of profitable companies like Nu Holdings, the Price-to-Earnings (PE) ratio is often considered the go-to metric. The PE ratio gauges how much investors are willing to pay for each dollar of earnings, making it especially useful for comparing established, profitable businesses like those in the banking sector.

What counts as a "normal" or "fair" PE ratio can vary with factors such as earnings growth expectations and the perceived riskiness of the company. Typically, businesses that are growing faster or seen as less risky command higher PE ratios, while those facing headwinds or industry challenges might trade with lower ones.

Nu Holdings currently trades at a PE ratio of 30.44x. This is significantly higher than the industry average of 11.19x and the peer average of 11.55x, indicating the market has high expectations for the company relative to its sector. However, Simply Wall St’s proprietary "Fair Ratio" for Nu Holdings sits at 20.04x. This Fair Ratio accounts for Nu’s unique profile, including factors like higher earnings growth, market cap, industry positioning, profitability, and company-specific risks. Unlike simple peer or industry comparisons, the Fair Ratio adjusts for these nuances and offers a more tailored benchmark for valuation.

Given that Nu Holdings’ actual PE ratio of 30.44x is well above its Fair Ratio of 20.04x, this suggests the stock is currently overvalued using this approach.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your Nu Holdings Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is simply your own story behind a stock’s numbers; it lets you lay out what you believe about Nu Holdings’ future revenue, profits, or margins and see what “fair value” that story leads to.

This approach bridges the gap between the big picture and the balance sheet, taking your view of where the company is headed and connecting it to a dynamic financial forecast and a corresponding fair value. Narratives are designed to be intuitive and accessible, and you can create and share them easily on the Simply Wall St platform, right within the Community page used by millions of investors.

With Narratives, you can instantly see how your own perspective compares to market prices, helping you decide if a stock may be a smart buy or sell for your scenario. Plus, as the company reports earnings or headlines break, Narratives update automatically, giving you a live view as new data emerges. For example, some investors might set their Nu Holdings Narrative with a bullish $20 price target based on rapid US expansion, while others lean conservative with a $14 value, focusing on risks from competition and regulation.

Do you think there's more to the story for Nu Holdings? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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