Martin Zweig Strategy Daily Upgrade Report: XP INC's Valuation and Earnings Growth Deserve a Closer Look

XP INC (XP) has been upgraded to 92% by Validea's Growth Investor model based on Martin Zweig's strategy. The company is a mid-cap value stock in the Investment Services industry with a persistent accelerating earnings and sales growth, reasonable valuations, and low debt. Zweig's strategy looks for growth stocks with these characteristics, and XP INC meets all of the strategy's tests.

XP Inc. (XP), a mid-cap value stock in the Investment Services industry, has been upgraded to 92% by Validea's Growth Investor model based on Martin Zweig's strategy. The upgrade underscores the company's strong fundamentals and growth potential, making it an attractive investment opportunity for long-term investors.

The upgrade is based on the firm's underlying fundamentals and stock valuation, with XP Inc. meeting all of the strategy's tests. These include persistent accelerating earnings and sales growth, reasonable valuations, and low debt. The company's P/E ratio, revenue growth in relation to EPS growth, and sales growth rate all passed the strategy's criteria [1].

XP Inc. is a Cayman Islands-based holding company that owns technological platforms for investments, financial services, and education, in addition to media and content platforms. The company distributes a range of financial products and services, including financial education and digital content platforms, financial advisory services, and open financial product platforms [2].

The company's recent financial performance has been impressive. In Q2 2025, XP Inc. reported a record net income of R$1.3 billion, up 18% year-over-year (YoY) and 7% quarter-over-quarter (QoQ) growth. This achievement was driven by a 29.7% net margin and a return on equity (ROE) of 24.4%, despite macroeconomic challenges [1].

XP Inc.'s strategic shift to fee-based models and cross-sell verticals has been a key driver of its growth. In Q2 2025, these initiatives generated $256 million in revenue, a 146% YoY increase. The company's capital efficiency, as measured by a 30.1% return on tangible equity (ROTE) and a 34.5% efficiency ratio, outperformed global peers [1].

The company's focus on high-net-worth (HNW) clients has also been a significant factor in its success. HNW client inflows increased by 43% YoY in Q2 2025, contributing to the company's resilience and positioning it as a defensive growth play in Brazil's competitive financial sector [1].

XP Inc.'s capital allocation strategy is equally compelling. The company executed BRL915 million in share repurchases under its BRL1 billion buyback program in H1 2025, reducing the share base and boosting diluted EPS by 22% YoY. With a 74% payout ratio and a commitment to return over 50% of net income to shareholders via dividends and buybacks in 2025-2026, XP Inc. prioritizes value creation [1].

Despite near-term macro challenges, XP Inc.'s ecosystem-driven strategy and operational agility make it a compelling buy for investors with a multi-year horizon. As the company continues to expand its fee-based model and scale cross-sell verticals, its long-term value creation potential remains robust.

References:
[1] https://www.ainvest.com/news/xp-record-net-income-strategic-ecosystem-expansion-high-conviction-buy-defensive-growth-play-2508/
[2] https://www.nasdaq.com/articles/validea-martin-zweig-strategy-daily-upgrade-report-8-20-2025