Index removal puts XP in focus

XP (NasdaqGS:XP) has been removed from several Russell growth benchmarks, a shift that typically prompts index fund rebalancing and can influence short term demand for the stock among passive investors.

XP's share price has been choppy, with a 1 day share price return of 1.12% and a 90 day share price return that is down 14.34%, while the 1 year total shareholder return has also declined 17.39%. This points to fading momentum despite short term rebounds around the index removals.

If the Russell changes have you reassessing your watchlist, it could be a good moment to broaden your search with the 20 top founder-led companies

XP now trades at $16.31 a share, alongside a value score of 6 and indications of a discount to some valuation estimates. After a long stretch of weaker total returns, is this pricing in future growth or suggesting a potential opportunity for investors?

Most Popular Narrative: 32% Undervalued

On the most followed view of XP, a fair value of about $23.97 sits well above the current $16.31 share price. That gap hinges on specific growth and margin assumptions that run through 2029.

Analysts expect earnings to reach R$7.3 billion (and earnings per share of R$13.16) by about June 2029, up from R$5.2 billion today. The analysts are largely in agreement about this estimate.

Want to understand what has to happen inside XP for that earnings path to hold up? Revenue growth, margin resilience and a higher future earnings multiple all play a part. Curious which of those levers does the heavy lifting in this fair value story?

Result: Fair Value of $23.97 (UNDERVALUED)

However, there are still clear pressure points for XP, including fee compression from competition and higher operating expenses that could squeeze margins if revenue momentum softens.

Next Steps

With XP's mixed signals in mind, does the balance of risks and potential rewards feel compelling to you, or not quite there yet? Act while the details are fresh and pressure test the upside by reviewing 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.