Since I wrote about multi-asset trading platforms Plus 500 (LSE: Plus) In mid-August, its share price fell sharply. I don’t think it will last very long. It was the biggest FTSE 250 Profit in early trading today after reporting a positive trading update. Even as I write, it is the third largest beneficiary, about 3% more than the last close.
Positive trading updates
The company says it is “Despite more stable market conditions, Q21 has provided a more positive momentum during 2021 …”. Financial transactions began to lockdown last year as household savings increased with market uncertainty. As a result its end results look relatively disappointing compared to this year. But the trading update has definitely added investors ’optimism about the stock again. The company now expects both revenue and earnings ahead of analysts ’estimates.
Dirty-cheap FTSE 250 stock
With new expectations of improved performance, the company’s share price may regain momentum again. It quickly overcame the stock market crash early last year and even surpassed pre-epidemic levels during this time last year. However, it then lost momentum, largely moving sideways. Its price-to-earnings (P / E) ratio of 5.6 times is a horrible one, making it a dirty-cheap stock in my view, which is another Reasons to buy my stock too.
This is especially so, since if it had raised the expectations of investors in its numbers, it might not have remained that way. And they could, for both growth and income investors. The company’s dividend yield is also quite good above 6%. The average FTSE 250 dividend yield is very low at 1.9%. And there are only a few companies on the index that have a yield of more than plus 500. Expectations of improved earnings only increase expectations of potentially good dividends.
Hedge against uncertainty
It is a good stock even though the stock markets are still uncertain. The epidemic is not over yet and another ‘firebreak lockdown’ was discussed late last month. Moreover, policymakers are now scrambling to withdraw quantitative easing. In fact, some financial aid has already been withdrawn in the UK, such as the Stamp Duty Holiday and the Farlow Scheme. This could potentially lead to more market fluctuations, which could create an investment opportunity in the case of platforms like the Plus 500.
Should I buy plus 500 stock?
A disadvantage with the company, though, is that its performance can be inconsistent. In 2019, it reported weak numbers, while years later it showed a smart recovery. This year may be weaker than last year due to the high base effect. I’m a little uncomfortable with the unpredictability of its numbers. Moreover, its debt has been rising in the last two years, although it is still under control.
But if I look beyond this one aspect, I think there is a lot more to the stock. I maintained that it was still a buy for me.
Manika Premsingh has no position in any of the shares mentioned. Motley Flower UK has no position on any of the shares mentioned. The opinions expressed in the companies mentioned in this article may differ from those of the authors and therefore the official recommendations we make on our subscription services such as Share Advisors, Hidden Winners and Pro. Here at The Motley Flower we believe that considering a variety of insights makes us a better investor.