Nubank : A wonderful company at a fair price

 What other ideas do I have? Nubank. Its about 14.18USD per share today. PE of 45. Growing at 50% growth rates. They are gaining 15 to 20 million users every single year. They surpassed 100million recently. Mostly in Brazil and Mexico. The growth of the users is on top of the growth in the products. It becomes exponential. A growth of 20% in users and an expansion of the services provided to overall users grows by another 25%. Actual growth at the topline is (1.2*1.25=1.5)50%. Its growing explosively.

Current PE is something like 45. Which I have come to learn, is not a high number when your company is growing at 30 to 50% each year. The PE/Growth is less than 1. The question is whether they are able to maintain such high growths.

Some of the eye popping charts are the user growth 

The upward trajectory from 24 million users in 2020 to 105million users in 2024 is truly eye opening. It's the type of chart that investors like me love. Attached is the 2nd quarter 2024 presentation.

This is a snapshot from their presentation on the revenue and margins the business is pulling in. The numbers are absolutely eye popping. Revenue is growing at 60%+ a year, at the same time margins are actually going up. This is a classic example of a technology company that is using technology to obtain operating leverage. The increase in revenue is on top of a relatively fixed cost. So margins go up the higher revenue goes. The profit growth is even faster than the revenue. A single platform is able to hold millions of users without needing additional employees.

Another figure that pops out at me is the amount of employees that the banking system in Brazil requires. Nubank is able to operate at a fraction of the number of employees. Another detail is that the Brazillian banking system is actually being forced to cut out the fat. I believe the number of branches of most banks in Brazil are actually going down.

The following is a short of what the CEO, David Velez has stated in several interviews. "The Brazil banking system is ripe for disruption as the incumbent banks do not serve the customers in an efficient way. Opening accounts take a long time, there are armed guards guarding and its a very inefficient system. There is a lot of deadwood in the system as the incumbent banks have an oligopoly over the banking system."

Nubank has money going towards R&D, as per the CEO. almost 50% of the budget is for moonshot ideas which are nowhere near implementation. It's exciting, as the company's DNA is very much that of a tech company disrupting the banking sector. There are so many things they can build with a platform of 100million users and high growth. One thing that was mentioned was ETF. An area ripe for disruption is the management fees for ETFs. IE: A Vanguard(Low cost ETF like the Vanguard) like system where there is little or no management fees charged for the creation of large ETF's using AI, or simply using tech.

Its likely that the platform will incorporate things other than normal banking. They already have a crypto area, its likely equities trading will be incorporated into their system. It's going to be the APP that the banks want to create.

The regional expansion is also phenomenal. While the initial concept was to disrupt the Brazillian banking system rife with deadwood. It is successfully penetrating the Latin America market. The product a Net Promoter Score(NPS) of 90 in brazil and 94 in Mexico. Apparently this is the score based on how its users would promote the company to other people. So the regional expansion is also extremely successful. Perhaps due to the cartels in Mexico(making it difficult for people to get a banking account)?

It's very much on my radar and I intend to buy into this company once I have sold out of my OMH. Sadly, a great asset that was mismanaged. 

Just their presentations give the figures to make Nubank a compelling case that Nubank is a great business.