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XP INC (XP) has been upgraded to 92% based on the firm's underlying fundamentals and valuation, according to Validea's Growth Investor model based on Martin Zweig's strategy. The mid-cap value stock in the Investment Services industry has shown persistent accelerating earnings and sales growth, reasonable valuations, and low debt. This upgrade indicates strong interest in the stock.

XP Inc. (XP), a mid-cap value stock in the Investment Services industry, has received a significant upgrade from Validea's Growth Investor model, based on Martin Zweig's strategy. The upgrade, which elevates the stock's score to 92%, is driven by a combination of strong underlying fundamentals and reasonable valuations.

The firm's persistent accelerating earnings and sales growth are notable. According to the latest earnings report, XP Inc. reported a record Q2 2025 net income of R$1.3 billion, up 18% year-over-year (YoY), driven by a 29.7% net margin and a 24.4% return on equity (ROE) [3]. This impressive performance underscores the company's operational resilience and strategic agility, even in the face of macroeconomic headwinds.

XP's strategic shift to fee-based models and cross-sell verticals has been a key driver of its growth. In Q2 2025, fee-based arrangements accounted for 5% of total client assets, with management targeting 7%-8% over the next few years. Additionally, new product offerings, such as credit cards, life insurance, retirement plans, and consortium services, generated $256 million in revenue, a 146% YoY increase [3]. These diversification efforts have not only boosted revenue but also deepened client relationships.

The company's capital efficiency is also commendable. XP's return on tangible equity (ROTE) reached 30.1%, and its efficiency ratio dropped to 34.5% (LTM), outperforming global peers. The company's net margin expansion of 320 basis points YoY was driven by disciplined cost management and a shift toward higher-margin fee-based models [3].

Valuation metrics also support the upgrade. XP's price-to-sales ratio of approximately 6.92 indicates a relatively moderate valuation compared to industry counterparts, suggesting room for growth. The company's balance sheet reports cash reserves around $87.88 billion, providing a safety net for future innovative pursuits [2].

Analysts have also shown confidence in XP's prospects. Jorge Kuri from Morgan Stanley maintained a Buy rating on the stock with a $26.00 price target, citing the company's growth potential and attractive valuation [1]. Similarly, Citi maintained a Buy rating with a $22.00 price target.

In conclusion, XP Inc.'s strong fundamentals, strategic diversification, and reasonable valuations have led to a significant upgrade by Validea's Growth Investor model. The stock's resilience and growth potential make it an attractive investment opportunity for investors and financial professionals.

References:
[1] https://www.tipranks.com/news/ratings/xp-inc-strong-growth-potential-and-attractive-valuation-amid-revenue-shortfall-ratings
[2] https://www.timothysykes.com/news/xp-inc-xp-news-2025_08_19/
[3] https://www.ainvest.com/news/xp-record-net-income-strategic-ecosystem-expansion-high-conviction-buy-defensive-growth-play-2508/