Why XP Inc.'s Q1 Surge Makes It a Top Play on Brazil's Fintech Boom

In a market rife with volatility, XP Inc. (XPID) has delivered a masterclass in operational discipline and strategic foresight. The Brazilian financial services giant’s Q1 2025 results—highlighted by a 24% YoY EPS surge to R$2.29, robust net inflows, and margin expansion—underscore its position as a prime beneficiary of Brazil’s growing fintech revolution. For investors, this is a rare opportunity to buy a high-growth, undervalued stock with a fortress balance sheet and a shareholder-friendly buyback program. Here’s why XP deserves a place in your portfolio now.

The EPS Surge: A Testament to Operational Leverage

XP’s 24% YoY EPS growth is no accident. It reflects a deliberate focus on cost discipline and operational efficiency. The adjusted net margin expanded to 28.4% in Q1 2025 from 25.4% a year ago, driven by a lower compensation ratio (23.1% vs. 25.2%) and an industry-leading 34.1% efficiency ratio—the lowest since its IPO. This is operational leverage at its finest: XP is generating more profit while controlling costs, even as it scales.

Net Inflows and Diversification: The Fuel for Sustained Growth

With R$24 billion in net inflows—a 79% YoY jump—XP is attracting clients at an unprecedented rate. Retail activity drove R$20 billion of this, up 53% YoY, signaling strong demand for its low-fee, tech-driven platform. Meanwhile, gross written premiums for insurance products surged 40% YoY, diversifying revenue streams beyond traditional trading. This isn’t just a trading story—it’s a platform play. XP’s 4.7 million active clients and a Net Promoter Score of 73 (among the highest in finance) reinforce its sticky client base.

BIS Ratio and Buybacks: Financial Fortitude Meets Shareholder Value

XP’s BIS ratio of 19.0%—a key measure of capital adequacy—remains comfortably within its 2026 target range of 16%-19%. This provides ample flexibility for its newly announced R$1.0 billion share buyback program, which will reduce shares outstanding and amplify EPS growth.

This buyback isn’t just shareholder-friendly—it’s a clear signal of management’s confidence. With a forward P/E of ~12x compared to its five-year average of ~18x, XP is trading at a discount to its growth potential.

Navigating Headwinds with Resilience

Critics may point to QoQ declines in gross revenue (-4%) and institutional revenue (-3% YoY), but these are temporary speed bumps. Seasonal factors and macroeconomic uncertainty in Brazil are well-documented, yet XP’s adjusted net income hit a record R$1.236 billion, up 20% YoY, proving its model’s durability. Meanwhile, its R$22.2 billion credit portfolio—80% collateralized by investments—minimizes risk.

The Undervaluation Case: XP’s Multiple Is Lagging Its Momentum

XP’s stock has underperformed peers despite outpacing them in growth metrics. A price-to-book ratio of 1.3x versus its historical average of 2.0x suggests the market isn’t pricing in its long-term potential. With ROE at 24.1% and a R$1 billion buyback, XP is primed to close this gap.

Conclusion: XP’s Time to Shine

XP Inc. is a high-margin, low-cost fintech leader with a client-centric platform and a balance sheet that rivals banks. Its 24% EPS growth, diversified revenue streams, and share buyback create a compelling case for undervaluation. With Brazil’s economy on the cusp of a fintech boom, XP is positioned to capture disproportionate gains.

Investors who act now can secure a stock trading at a 20% discount to its intrinsic value, backed by a management team executing flawlessly. Don’t let this opportunity slip—buy XP before the market catches on.

The data tells the story: XP’s earnings are outpacing revenue, a hallmark of a company with true operational mastery. This is a buy.