XP (NasdaqGS:XP) is back in the spotlight after being flagged as an attractive value stock. A favorable Zacks Rank and a strong Value grade have caught the attention of value-focused investors.

XP's recent momentum has been mixed, with a 30 day share price return of 5.38% and a year to date share price return of 5.25%, but a 3 year total shareholder return that is down 26.27% and a 5 year total shareholder return that is down 60.50%. This suggests that recent optimism around improved earnings expectations is still set against a weaker long term experience for holders.

If XP's value story has you reassessing the market, this could be a good moment to look beyond a single stock and check out 19 top founder-led companies

XP shares have picked up recently, yet long term returns remain weak and sentiment is still rebuilding. Has most of the easy upside already played out, or does the current valuation still leave meaningful room ahead?

Most Popular Narrative: 26.5% Undervalued

XP's most followed narrative points to a fair value of $23.17 against a last close of $17.03, which implies a sizeable valuation gap built on specific long term expansion assumptions.

The ongoing expansion of Brazil's middle class and gradual increase in personal savings rates are set to grow XP's addressable market, supporting long-term AUM and retail client growth, which should bolster revenue and earnings power as the company penetrates deeper into emerging segments.

Curious what kind of growth runway supports that valuation gap for XP. The narrative leans heavily on compounding revenue, steady profitability and a richer product mix. The exact numbers behind that story may surprise you.

Result: Fair Value of $23.17 (UNDERVALUED)

However, XP's story could shift quickly if fee pressure from banks and fintechs intensifies, or if higher marketing and technology spending weighs on profitability more than expected.

Next Steps

With sentiment around XP starting to improve again, this is a good moment to move quickly and stress test the upside for yourself. To see what this optimism is based on, review the 5 key rewards

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.