ITUB Stock Rallies 2.44% as Plummeting EPS and Operating Cash Flow Collapse Signal Investor Concerns

Itau Unibanco Pref ADR (ITUB) closed flat for two consecutive days, with a 2.44% increase over the past two days.

Despite a 13.50% year-over-year revenue increase to BRL 32.26 billion and an 18.10% rise in net income to BRL 8.62 billion in Q2 2023, the stock’s earnings per share (EPS) plummeted by 76.87% to BRL 0.18. This sharp decline in EPS, juxtaposed with strong top-line and bottom-line growth, may indicate potential challenges such as share dilution or one-time charges, which could dampen investor confidence.

The company’s operating cash flow contracted by 87.59% to BRL 4.25 billion, signaling operational inefficiencies or increased expenses. This severe reduction in cash from core activities could hinder the ability to sustain operations, fund investments, or maintain dividends, further pressuring the stock price.

Financing cash flow also deteriorated by 127.84% to BRL -5.39 billion, reflecting significant outflows likely from debt repayments or shareholder returns. Coupled with a net cash position decline of BRL 15.39 billion, the liquidity strain raises concerns about the company’s financial flexibility and capacity to invest in growth initiatives.

Balance sheet metrics reveal a 12.40% year-over-year increase in total assets to BRL 2.43 trillion, matched by a 12.39% rise in liabilities to BRL 2.25 trillion. The low price-to-book ratio of 0.29 suggests undervaluation or market skepticism about asset conversion into profits, while the return on assets (ROA) of 1.48% indicates modest efficiency in generating profit from assets.

A material fact related to “Payment of Interest on Capital” was disclosed on August 5, 2025, though the relevance remains unclear. Additionally, UBS downgraded ITUB to “Neutral” from “Buy” on July 10, 2025, citing valuation concerns, highlighting the impact of analyst sentiment on stock price dynamics.

Collectively, the sharp decline in operating cash flow, significant EPS drop, and liquidity pressures are critical near-term factors affecting ITUB’s stock price. While the company’s strong revenue growth and low P/B ratio present opportunities for value investors, the immediate focus should remain on stabilizing cash flow and restoring EPS growth to address investor concerns.