By Brazil Stock Guide – Nu Holdings Ltd. (NYSE: NU) has delivered strong operating growth since its initial public offering, but its stock performance has trailed several Brazilian financial companies, underscoring how much the IPO valuation mattered, according to BTG Pactual.
In a May 20 sector note on Brazilian financials, BTG Pactual said Nubank’s shares had risen just 22% in Brazilian reais since the company’s December 2021 IPO, equal to about a 4% annual return. The report said that performance was “underwhelming” compared with high-quality incumbent banks and dividend-paying financial names.
The bank’s analysts said the contrast is notable because Nubank has been one of the strongest operational performers in BTG’s coverage since going public. The company expanded its customer base faster than even optimistic forecasts at the time of the IPO and converted that growth into financial results that many investors considered unlikely in 2021, according to the report.
BTG said the issue was less about execution and more about valuation. Nubank’s IPO price embedded highly optimistic assumptions for growth, profitability and cost of equity, leaving little room for weaker macro conditions, higher interest rates, investor aversion to long-duration equities or any operational miss.
The comparison with other listed financial companies shows how much market structure helped incumbents. Since Nubank’s IPO, Caixa Seguridade (B3: CXSE3) rose 184%, BTG Pactual (B3: BPAC11) gained 175%, Porto Seguro (B3: PSSA3) advanced 171%, Itaú Unibanco (B3: ITUB4; NYSE: ITUB) climbed 159% and BB Seguridade (B3: BBSE3) gained 143%, according to BTG’s table based on BTG, Yahoo Finance and Bloomberg data.
Banco do Brasil (B3: BBAS3) rose 74%, while the Ibovespa advanced 62%. B3 SA (B3: B3SA3) gained 55%, Inter & Co. (NASDAQ: INTR; B3: INBR32) rose 44%, and Bradesco (B3: BBDC4; NYSE: BBD) advanced 29%. Nubank’s 22% gain also lagged Bradesco, the incumbent it was expected to disrupt, BTG said.
Other adjacent names performed worse. MercadoLibre Inc. (NASDAQ: MELI) rose 18%, Santander Brasil (B3: SANB11) gained 9%, StoneCo Ltd. (NASDAQ: STNE) fell 37%, XP Inc. (NASDAQ: XP) dropped 45%, IRB Brasil (B3: IRBR3) declined 51% and PagBank parent PagSeguro Digital Ltd. (NYSE: PAGS) lost 71%, according to the same table.
The report highlighted insurers such as BB Seguridade and Porto Seguro as consistent performers, with a significant portion of returns coming from dividends. In Brazil’s high-cost-of-capital environment, those payouts have been an important driver of shareholder returns, BTG said.
BTG also pointed to its own performance as an example of reinvestment working when earnings compound. The bank said BTG Pactual generated earnings growth above 20% a year while improving return on equity, showing that capital reinvestment can also reward investors when supported by returns.
Nubank now trades at 11.5 times estimated 2027 earnings, according to BTG. While near-term non-performing loan risk remains a point to monitor, the bank said the current entry point is more attractive than at the IPO and could create a setup for Nu to outperform over the next five years.
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