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100% profit increase! I will buy a ‘no-brainer’ FTSE 250 stock today


Since its lowest in May last year Airtel Africa (LSE: AAF) The share price has tripled. This is mainly due to recovery from the epidemic, as highlighted by a series of such excellent results. Today was no different with FTSE 250 stocks reporting profits before a 101% tax increase in the last six months. This is why Airtel Africa’s share price has risen more than 10% today. As such, after the trading update, I was tempted to add more Airtel Africa shares to my portfolio. The reason is here.

Trading updates

The half-year trading update was strong across the board. In fact, compared to the same period last year, revenue was 25% higher at 2.272 billion. Further, the group has seen revenue growth in its various segments, with Mobile Money showing a particularly strong growth of 42%. This shows that the company is still growing rapidly.

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And unlike many other growth stocks, Airtel Africa is also recording strong profits, and it said the pre-tax profit totaled $ 567m. As already stated, this is an increase of 101% over last year’s results. As profits have grown faster than revenue, this shows that the company is improving its operating efficiency. This is a good sign for the future, and hopefully, profits could increase.

The group’s current gains mean that the stock trades at a cheaper valuation. In fact, using these results, Airtel Africa’s price-to-earnings ratio is around 9. This is lower than a large number of other FTSE 250 stocks, and ratios below 10 often indicate that growth is either slow or negative. Since this doesn’t seem to be the case with Airtel Africa, I think it’s underestimated.

For other reasons

Nevertheless, this low P / E ratio may reflect some of the risks associated with the group. For example, although Africa is seen as a high-growth region, it is also seen as very unpredictable. In fact, sub-Saharan Africa has recently been exposed to a third wave of coronavirus, due to very low vaccination rates. Many African currencies, such as the Nigerian Naira and the Zambian Kwacha, have also seen a recent devaluation. Both of these factors could have a negative impact on Airtel Africa, making it more risky than some other FTSE 250 stocks.

But I’m sure it can address these issues. For example, the company has been able to steadily increase its customer base, which recently reached 122.7m. The balance sheet is also steadily improving, and the net-to-date underlying EBITDA is now only 1.5x. I feel that it is sustainable.

What am I doing with this FTSE 250 stock?

Airtel Africa makes up the largest part of my portfolio, and I’m still tempted to buy more. Its growth is excellent, and it is accompanied by a dividend of about 4%. Its subsidiary, Airtel Money, is also delivering excellent growth, and it has encouraged an investment. MasterCard. As such, although there is no doubt involved with this stock, in my view there are many positive aspects to be overlooked. Therefore, I believe Airtel Africa bought a ‘no-brainer’ for me so I can buy more.

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Stuart Blair owns shares in Airtel Africa. The owner of The Motley Fool UK and MasterCard recommends 7 The Motley Fool UK recommends Airtel Africa Plc. Opinions about the companies mentioned in this article may differ from those of the author and therefore our official recommendations for subscription services such as Share Advisor, Hidden Winner and Pro. Here at The Motley Fool we believe that different ranges of insights are considered Our good investors.





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