Plus500 is a CFD (contracts for difference) broker listed on the London Stock Exchange (LSE) under the PLUS ticker. The shares are part of the FTSE 250 Index.
The company has virtually no debt, paid high dividends in past years and expects to keep up doing so.
Their business model is scalable and they have a huge gross profit margin, which ensures a solid free cash flow stream.
Volatility and low P/E ratio
The price of Plus500 shares is fairly volatile and the fair value of the company also fluctuates. As result, it's safe to say that Plus500 is a high-risk stock. Nevertheless, we still believe that Plus500 is a good value stock buy as long as investors are allowed to trade CFDs. Its P/E ratio of 6.73 is low and among the better ones on the London Stock Exchange.
Examples of Plus500 share price volatility
- 375 pence in 2016 (low)
- 2,008 pence in 2018 (high)
- 495 pence in 2019 (low)
- 1,632 pence in 2020 (high)
Financial figures for Plus500:
- the net income of Plus500 Ltd - mostly generated by the online trading platform - was $310.6 million in 2021.
- Plus500 Ltd's market cap is about GBP 1.5 billion at current share price (market cap is the total number of outstanding shares multiplied by the share price)
- the company's net profit margin fluctuated in a 36%-57% range over the past 6 years
- revenue increased from $327.9 million in 2016 to $718.7 million in 2021
Investors can buy Plus500 shares on the LSE or through exchange traded funds (ETFs), usually as part of a global stock market fund.
77% of retail CFD accounts lose money
Strengths of Plus500 Ltd
- High adjusted earnings
- Low price to earnings ratio
- Diversified foreign exchange profile
- Decent sales to earnings ratio
- High dividend
- Special dividends
- High shareholder returns
- Trading platform localized in a great number of languages
Weaknesses of Plus500 Ltd
The business model of the company is heavily reliant on CFD trading, which is an OTC transaction that some consider as an activity very similar to gambling. There is a distant possibility that CFD trading will be outlawed in the future and hence the market on which Plus500 Ltd operates may change drastically.
There is nothing to indocate currently that this is a realistic scenario so stay calm and wait for the next dividend.
Valuation of Plus500 Ltd
The company's current (02/2022) valuation is $1.95 billion. The valuation typically depends on earnings per share (EPS), dividends, and market expectations about future revenues.
Does the current valuation reflect the fair market price?
- EPS is high, currently around GBP 2.24 per share.
- Assets are predominantly current assets, that is mostly cash.
- Balance sheet is strong, no debt and plenty of current assets.
- The paid directors of the company are also major shareholders.
- Currently Plus500 Ltd is priced as a value stock, and we expect that after last year's purchase of Cunningham Commodities LLC this will remain unchanged.
Dividends of Plus500 Ltd
- are high, accounting for 4-5% of the share price currently. Plus500 pays dividends twice a year, the ex dividend date is usually 6 months before the actual dividend is paid.
- the company occasionally pays a special dividend
- we expect a future growth of dividends
Despite solid business fundamentals, investing in Plus500 shares comes with a set of risks, as all stock investments do. Weigh your options carefully before making a final investment decision.