NU is undervalued given its growth and long runway in Latin America.

All right, let's now move on to the next stock that I want to talk about which is New Bank. New Bank had a fantastic earnings report and the stock was up over 10% the next day after earnings.

However, it has pretty much given all of its gains back, which I think is kind of surprising because this was truly an incredible report from the business.

Now, very quickly, for those of you who may not know, New Bank is a fintech business down in Latin America. Most of their business is currently in Brazil, and they're also expanding into Mexico and Colombia.

They do have a small expansion underway in the United States. But personally, I would not view the thesis on this business as it's successfully expanding into the United States, but instead the thesis is that it is digitizing the Latin America economy, specifically again Brazil, Mexico, and Colombia.

It also competes directly with Marcato Libre's fintech platform, and Marcato Libre is the stock that I have in my portfolio. Both of these businesses are expanding rapidly.

So, let's take a quick look at the highlights from New Bank's earnings. Now, this screenshot here shows us the highlights on an FX neutral basis. And we can see that customers are up 13%, purchase volume is up 16%, average revenue per user is up 22%, the overall portfolio is up 37%, deposits are up 18%, revenue was up 39%, gross profits up 43%, and earnings were up 49%. with the first quarter being the first quarter of over $1 billion in GAP earnings.

So, New Bank's business is growing extremely well and again earnings were up 49% on a year-over-year basis for the second quarter.

This next screenshot comes from their quarterly investor presentation and it really shows the thesis of New Bank in a single image. Here you can see that the customers of New Bank are continuing to grow very well.

The average revenue per customer is also growing. the gross revenue of the business is pretty much exploding and then the cost to serve is actually coming down represented by the efficiency ratio also declining.

This ultimately leads to earnings exploding and earnings being over $1 billion in the quarter now. So to put that simply, New Bank is continuing to grow its customers. Its revenue per customer is growing.

Its cost to serve those customers is coming down and that leads to massive profit growth.

In fact, if we head over to Stock Unlock here really quickly, I have a chart here that I want to show you. And what we're going to do is show the average revenue per customer and the average cost to serve those customers.

And let's take a look at this on a line basis. And here you can see that the average revenue per customer is continuing to grow and scale very well. However, the average cost to serve those customers is not growing at all.

And in fact, since the fourth quarter of 2020, it is down a total of 9%. While again at the monthly average revenue per user has grown 418% over that same time. This is how New Bank's business is continuing to grow its profits at an explosive pace.

It is gaining customers. It's getting more revenue per customer, but its cost to serve on a per customer basis is not going up.

But let's get back over to New Bank's investor presentation. And this screenshot shows us that New Bank is now the largest digital bank in Mexico. And the runway here is still massive.

It also broke even in Mexico in the first quarter of this year. And now Mexico is adding directly to the bottom line and helping the bottom line grow faster. 35% of its users in Mexico had no bank account before signing up with New Bank and 52% had no credit card.

Mexico is still a very underbanked nation and New Bank and Marcato Libre are the businesses bringing people online and giving them access to the digital economy.

New Bank is also outperforming the credit markets in Brazil, keeping loss rates low despite the incumbents seeing loss rates starting to increase. In fact, New Bank's non-performing loans are actually declining while the rest of the market is seeing increases.

This is at the same time as the business is growing 50% on a year-over-year basis and continuing to take market share. In my opinion, this shows that New Bank's underwriting capabilities are superior and better than the incumbents.

Now, let's head back over to Stock Unlock and take a look at some of the KPIs. And here we can see that New Bank's revenue hit $19.34 billion in the trailing 12 months, and it is reacelerating.

If we turn on the percent change in the trailing 12 months, New Bank's revenue has grown by 50.5%. Now, this is great growth at this level of scale. Next, if we take a look at New Bank's earnings, they have now done $3.61 billion in the trailing 12 months.

And on a quarterly basis, you can see that this is the first quarter where they have officially achieved over $1 billion in earnings. On an annualized basis, New Bank is now doing about $4 billion in earnings as well.

So, this business is growing very well and it is extremely profitable.

So, now let's talk about New Bank's valuation. And here we can see that it currently has a valuation of 71.6 billion on the stock market. So, let's open up our calculator very quickly and go 71.6 6 billion divided by about 4 billion in annualized earnings.

Now, which means that New Bank is trading for about 18 times annualized earnings if they can continue to produce about a billion dollars in quarterly profits. This is not a very high price multiple for a business that is still seeing its top line grow by 50% on a year-over-year basis.

I understand that New Bank is obviously a bank, but typically mature banks trade for about 15 times earnings while they grow around 10% per year. So, New Bank is not selling for that much of a premium despite it seeing about five times as much growth as your typical bank.

If we also take a look at New Bank's forward PE, it's currently sitting at 14.3. This in my opinion is an extremely low multiple for a business that is growing so rapidly and in my opinion has such a long runway for future growth.

So I do think that new bank is actually quite undervalued in the market right now.

Now the reason that I do not own new bank in my portfolio is because I have Marcato Libre and Marcato Libre has grown into a pretty large position of mine. Marcato Libre has its own fintech business that is largely the same as Newbank.

But I think that Marcato Libre actually has some competitive advantages because it has even more data on its customers because a lot of its customers also use its e-commerce platform.

So Marcato Libre can see what its customers are spending money on on the e-commerce platform as well and get even more insights and data there. Additionally, Marcato Libre's fintech business did $15 billion in revenue in the trailing 12 months, which puts it roughly two quarters behind where New Bank is.

Or in other words, it's almost the same size as New Bank today. But Marcott Libresy's entire business is valued at around 100 billion in the stock market right now. So for an extra $30 billion I am getting roughly the same size fintech business maybe delayed by about 6 months.

The largest e-commerce platform in Latin America a massive media and subscriptions business and also a massive highly profitable and rapidly growing advertising business. Again all of that for an extra roughly $30 billion.

So I think that Marcado Libre has a little bit of a stronger moat, much more tailwinds and just a much more diversified business too. So I think that the premium for Marcato Libre is more than justified and I think that Marcato Libre is even cheaper in the market today than New Bank.

But I still think that New Bank had a fantastic earnings result and I think that this stock is also undervalued in the market today.