Nu Holdings Ltd. (NYSE:NU) is a leading figure in the digital banking sector, known for its innovative financial services across Latin America. The company competes with notable names such as StoneCo Ltd. (STNE), SoFi Technologies, Inc. (SOFI), Grab Holdings Limited (GRAB), Affirm Holdings, Inc. (AFRM), and Toast, Inc. (TOST), offering a variety of services including credit cards, personal loans, and mobile payments.
Key metrics such as the Return on Invested Capital (ROIC) and the Weighted Average Cost of Capital (WACC) are essential for assessing the efficiency of these companies. NU's ROIC is 4.55%, with a WACC of 13.56%, leading to a ROIC to WACC ratio of 0.34. This ratio indicates that NU is generating returns lower than its cost of capital but still outperforms most of its peers in this metric.
StoneCo Ltd. (STNE) presents a ROIC of 1.67% and a WACC of 13.97%, resulting in a ROIC to WACC ratio of 0.12. Despite STNE's lower ROIC compared to NU, its efficiency in generating returns relative to its cost of capital is relatively better, making it a standout among its competitors.
Conversely, SoFi Technologies, Inc. (SOFI), Grab Holdings Limited (GRAB), and Affirm Holdings, Inc. (AFRM) showcase negative ROIC to WACC ratios, with SOFI at -0.01, GRAB at -0.37, and AFRM at -0.19. These figures highlight the financial challenges these companies face in generating sufficient returns to cover their cost of capital.
Toast, Inc. (TOST) has a positive ROIC to WACC ratio of 0.08, yet it is lower than both NU and STNE, indicating that while TOST is generating returns above its cost of capital, it is not as efficient as NU and STNE in this regard. Overall, NU's performance in terms of ROIC to WACC ratio is commendable, especially when compared to its peers.
