Financial trading platform CMC Markets (LSE: CMCX) The stock has lost 4.1% so far in today’s trading. But that’s nothing compared to the 24% massive fall seen in early September. For a stock that has performed well over the past year, as trading activity has increased significantly in the ups and downs of the stock market, it looks startling.
Makes you frustrated with CMC updates
But there are good reasons for this. The company has released significant updates since the beginning of September. The first was his trading update where it lowered his earnings expectations. It now expects net operating between m 250m and £ 280m operating in the fiscal year ending March 1, 2022. This is a 15% to 25% reduction in expectations from the previous number of 330m.
This led to a sharp fall in its share price, sending it back to its June 2020 level and erasing all profits made in the previous year. It has fallen further today after repeating his instructions. The frustration of investors is understandable. Growth investors like me will look at the price-to-earnings (P / E) ratio of a company to understand the potential for price growth. Decreasing earnings means that prices need to be adjusted accordingly, and this is exactly what happened.
An eye-popping dividend yield
Dividend investors may also be disappointed. The CMC market now has a huge dividend yield of 11%. It has no doubt improved due to its recent share price decline. But otherwise, it has shown a healthy yield. In the last five years, it averaged 6%. But dividends depend on earnings. So if the company lowers its earnings forecast, it means a small dividend increase.
A case for FTSE 250 stock
Still, at current yield levels, I think there is still a strong case for buying stocks. It is particularly noteworthy that its P / E has already sounded quite nuted at only 4.5 times. Excluding any other downgrades, I think it seems like a good stock to buy now. And to be fair, the company had already warned us about restraint in our advance results.
Furthermore, the recent acquisition of more than 500,000 investor accounts from Australian and New Zealand banking groups, more simply known as ANZ, is encouraging. Since 2001, CMC has been providing white-label services to these clients in any way through its trading technology. The acquisition could significantly add to its earnings, allowing for future growth.
What would I do
So, despite the latest decline in income forecasts, I am quite enthusiastic FTSE 250 The stock is bullish enough to buy its shares recently. I think it is risky for larger stock market conditions, but also that it is a stock with high potential. Now that it has fallen, I think I will buy more of it.
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Manika Premsingh owns shares in CMC Market. 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.