Key insights
- The article compares Inter&Co (INTR) with Nu Bank (NU), focusing on INTR's lower valuation multiples (P/E and book value) relative to NU, despite INTR's recent record net income. The author presents three scenarios for INTR's stock price based on varying ROE, BRL exchange rates, and P/E multiples. Key differences highlighted include NU's higher ROE and geographic diversification (Mexico, Colombia) versus IN
Hi
I currently own NU and I'm looking at Inter&Co (INTR) as a possible alternative. I don't want to hold both, since that would be the same Brazil digital-banking bet twice. I'd like people to challenge my numbers before I decide anything.
Where it stands (Oct 30 close) Price ~$4.01, down ~36% on Oct 26 after Lula won the runoff. NU fell ~21% the same day.
~6.2x trailing P/E, ~5x forward, ~0.9x book.
ROE ~16%, record Q2 net income of R$421M (+34% YoY).
At this price, using a ~9x exit multiple and a weaker real, the market seems to imply 2029 net income below 2026's. That's what caught my eye.
My rough 3-year scenarios
š» Bear (~$2.80, ā30%): ROE stuck around 12%, BRL at 7.0, P/E ~5x. This is basically Brazil going bad and Inter never scaling.
āļø** Base (~$9.20**): ROE ~19%, BRL at 6.0, P/E ~8.5x. Inter keeps growing and converges toward a "normal" Brazilian bank multiple, with no growth premium.
š Bull (~$17): ROE ~22%, BRL at 5.4, P/E ~11x. The efficiency targets get hit and the old valuation range comes back. The downside looks limited by book value, and the upside is large. That asymmetry is why I'm interested.
INTR vs NU, multiples and risk Multiples: NU trades ~17x earnings and 4-5x book, versus ~6x and ~0.9x for INTR. The gap is partly deserved as NU earns ~33% ROE versus ~16% for INTR. With Selic near 14%, Inter is barely earning its cost of equity.
Diversification: NU has Mexico (and Colombia) as an outlet. INTR is almost pure Brazil, so every move in the real or the Selic hits it fully. But I saw that INTR is trying to enter the US market (focusing primeraly on Brazilians there)
Liquidity and governance: INTR is a small cap, family-controlled (Menin), and less covered. It's the first thing funds dump when they exit Brazil, which explains the bigger drop.
Execution: Q2 revenue missed consensus. But: because NU is priced as a growth stock, its bear case is arguably deeper than INTR's
I would love to read your thoughts on this as value investors
Thanks by advance