The Best Bank Stock to Invest $500 in Right Now
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Emerging markets might be the best place to find lucrative investment ideas in today's banking industry. Consider that Latin America has a population of 665 million, roughly double that of the United States. However, unlike in the U.S., large segments of the population still lack basic modern-day privileges, like essential banking services.
As the Latin American economy matures, Nu Holdings (NYSE: NU) figures to win big, making it arguably the best bank stock in which you can invest $500 today.
I'll outline the case for Nu Holdings below, including its wide-open growth opportunities, exploding profit growth, and tantalizing valuation, which make it a compelling stock idea.
One of the world's fastest-growing banks
Nu Holdings is a digital bank in Latin America. It offers its customers a range of financial products and services, including bank accounts, debit and credit cards, loans, investing, and more.
Many traditional banks in developed countries were built on a network of brick-and-mortar branches. The internet has helped digital banks expand faster because customers can access them through a website or smartphone app. That's helped Nu grow its user base rapidly in recent years.
Despite only serving customers in Brazil, Mexico, and Colombia, the company's user base has increased from approximately 26 million in 2020 to over 110 million today. Nu's ongoing customer acquisition is going swell. The company's third-quarter customer count was 20.7 million higher than a year ago. It's now the leading bank in Brazil, serving 56% of the adult population. Nu's existing markets account for approximately 395 million of the region's 665 million people, so there's still plenty of room for Nu to expand into new countries.
As Latin American consumers grow their incomes, they will likely spend, borrow, bank, and invest more. Simultaneous customer expansion and increased banking engagement have fueled stellar revenue growth. Nu's Q3 revenue was $2.9 billion, a 56% increase year over year.
The bottom line is booming
As companies mature, their spending needs flatten out. Continued revenue growth eventually causes the company to turn profitable, and that's precisely what's playing out with Nu Holdings. The company's strong growth is trickling down to the bottom line, driving fast GAAP and non-GAAP net income growth.
Nu's Q3 earnings increased by a whopping 89% year over year. Analysts estimate that Nu will earn $0.41 per share for the entire year, a 71% increase over the $0.24 it earned last year.