Even though the stock market is trading near all-time highs, there are several companies priced at compelling valuations right now. In this article, I have identified two such fundamentally strong stocks in Nu Holdings (NYSE:NU) and Propel (TSX:PRL) that you can buy today with just $1,000. Let’s see why.
The bull case for Nu Holdings stock
Valued at a market cap of $75.86 billion, Nu Holdings is a digital bank that has gained massive traction in South American markets such as Brazil, Mexico, and Columbia. Despite its massive size, Nu continues to grow at a remarkable pace.
In the third quarter (Q3) of 2024, Nu increased sales by 56% year over year to US$2.9 billion, while gross profit growth was higher at 67% as gross margins expanded to 46% from 43% in the last 12 months. It added 5.2 million customers in Q3, ending the quarter with 109.7 million customers, up 23% year over year. This growth strengthens Nu’s position as among the fastest-growing digital services platform globally. Nu is already the institution in Brazil with the largest number of active customers in credit operations.
Nu reported an adjusted net income of US$592.2 million, indicating an annualized return on equity (ROE) of 33%, which is more than twice the ROE of the big Canadian banks. With US$2.4 billion in cash and an expanding bottom line, Nu has enough resources to reinvest in product development and geographic expansion.
Analysts tracking Nu expect sales to rise from US$8 billion in 2023 to US$15.3 billion in 2025. Its adjusted earnings per share (EPS) is forecast to expand from US$0.24 per share in 2023 to US$0.62 per share in 2025.
Priced at 25 times forward earnings, NU stock is still cheap, given its strong earnings estimates. In case the banking company trades at 40 times trailing earnings, NU stock will be priced at US$25 by the end of 2026, indicating an upside potential of 60%.
Propel Holdings stock
Another company part of the financial lending space is Propel Holdings, which is up a monstrous 315% in the last 12 months. Valued at $1.25 billion by market cap, Propel operates an online lending platform that facilitates access to credit products including lines of credit and installment loans.
In Q3 of 2024, Propel increased revenue by 41% year over year to $117.2 million, a quarterly record for the fintech company. Moreover, it increased:
- Adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) by 56% to $29 million.
- Adjusted net income by 66% to $14.1 million.
- Adjusted EPS by 64% to $0.38 per share.
Propel emphasized, “While continuing to maintain a prudent underwriting posture, we and our Bank Partners facilitated record originations driven by higher consumer demand particularly from existing and returning consumers, which represented a record for the quarter.”
Propel also pays shareholders an annual dividend of $0.60 per share, indicating a forward yield of 1.65%. These payouts have already risen from $0.29 per share in November 2022.
Priced at 11.8 times forward earnings, the TSX stock is cheap, given analysts expect adjusted earnings to grow by 50% annually between 2023 and 2025.
