Since I wrote about the multi-asset trading platform Plus500 (LSE: PLUS) in mid-August, its share price has largely fallen. I reckon that it may not stay down for too long, though. It was the biggest FTSE 250 gainer in early trading today after it reported a positive trading update. Even as I write, it is the third biggest gainer, up almost 3% from the last close.
Positive trading update
The company says that it “delivered further positive momentum during Q3 2021, despite more stable market conditions…”. Financial trading was buoyed last year in the lockdowns as household savings rose along with market uncertainty. As a result its last results looked relatively disappointing in comparison this year. But the trading update has clearly added to investor optimism about the stock once again. The company now expects both revenue and earnings ahead of analysts’ estimates.
Dirt-cheap FTSE 250 stock
With renewed expectations of improved performance, the company’s share price can regain momentum. It quickly overcame the stock market crash of early last year and had even far surpassed its pre-pandemic levels by this time last year. However, it has lost momentum since, broadly moving sideways. Its price-to-earnings (P/E) ratio is an abysmal 5.6 times, making it a dirt-cheap stock in my view, which is another reason for me to buy the stock too.
This is especially so, since it may not remain that way if investor expectations on its numbers keep building up. And they could, for both growth and income investors. The company’s dividend yield at over 6% is pretty damn good too. The average FTSE 250 dividend yield is way lower at 1.9%. And there are only a handful of companies in the index that have higher yields than Plus500. Expectations of improved earnings only increase hope for potentially better dividends.
Hedge against uncertainty
It is also a good stock to hold while the stock markets are still uncertain. The pandemic is still not entirely over, and as late as last month there was talk of yet another ‘firebreak lockdown’. Moreover, policy makers are itching to withdraw quantitative easing now. In fact, in the UK some fiscal support has already been withdrawn, like the stamp duty holiday and the furlough scheme. This could potentially result in more market fluctuations, which could continue to throw up investing opportunities, making a case for platforms like Plus500.
Would I buy the Plus500 stock?
The one drawback with the company, though, is that its performance can be inconsistent. In 2019, it reported weak numbers, while in the year after it showed a smart recovery. This year may turn out weaker than last year once again, because of a high base effect. I feel a bit uncomfortable with the unpredictability in its numbers. Moreover, its debt has also been rising in the last two years, though it is still under control.
But if I can look past this one aspect, I think there is much to like about the stock. I maintain that it is still a buy for me.
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Manika Premsingh has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.