Nu Holdings Ltd. (NYSE:NU) is a prominent digital banking platform in Latin America, offering a range of financial services including credit cards, personal loans, and savings accounts. Despite its innovative approach, NU's financial metrics reveal challenges in generating returns. With a Return on Invested Capital (ROIC) of 4.55% and a Weighted Average Cost of Capital (WACC) of 13.20%, NU's ROIC to WACC ratio stands at 0.34, indicating inefficiencies in generating returns above its cost of capital.
In comparison, StoneCo Ltd. (STNE) demonstrates a robust financial performance with a ROIC of 13.95% and a WACC of 10.41%, resulting in a ROIC to WACC ratio of 1.34. This suggests that StoneCo is effectively generating returns that exceed its cost of capital, making it a standout among its peers. StoneCo's ability to maintain a high ROIC to WACC ratio highlights its strong financial management and operational efficiency.
On the other hand, SoFi Technologies, Inc. (SOFI) and Grab Holdings Limited (GRAB) face significant challenges. SoFi's ROIC is -0.17% against a WACC of 16.06%, resulting in a ROIC to WACC ratio of -0.01. Similarly, Grab Holdings has a ROIC of -3.15% and a WACC of 8.55%, with a ROIC to WACC ratio of -0.37. Both companies are struggling to generate returns that meet their cost of capital, indicating inefficiencies in their operations.
Affirm Holdings, Inc. (AFRM) and Toast, Inc. (TOST) also show difficulties in achieving profitable returns. Affirm's ROIC is -3.09% with a WACC of 16.52%, leading to a ROIC to WACC ratio of -0.19. Toast, while having a positive ROIC of 1.03%, still falls short of its WACC of 13.39%, resulting in a ROIC to WACC ratio of 0.08. These figures suggest that both companies are not yet generating sufficient returns to cover their cost of capital.
