Plus500 Ltd, (PLUS.L), formerly Investsoft Ltd., is an Israel-based company, which develops and operates online trading platforms for retail customers to trade contracts for difference (CFDs) internationally over more than 1,700 different underlying global financial instruments, comprising equities, exchange traded funds (ETF), foreign exchange, indices and commodities. The Company offers its service to retail customers in more than 50 countries via platforms across multiple internet and mobile operating systems.
On Wednesday April 26th 2017, PLUS published a trading update for the three months ended 31st March 2017. The Company reported a significant improvement in profitability and quality of earnings, with an EBITDA margin of 59% coming in ahead of market expectations, on quarterly revenues of $77.5m. PLUS also reported strong operational KPIs, with record active customers during the period, up 6% on Q1 2016. The average user acquisition cost decreased by 31% vs. Q1 2016, and the board believes that this overall performance is consistent with current market expectations for the full year. CEO Asaf Elimelech said the Company has “started 2017 positively; we are confident we can continue to expand and enhance our competitive position whilst successfully incorporating regulatory changes with the minimum of disruption. Our strategy is supported by our strong financial position and cash generative business model, enabling us to deliver good shareholder returns despite short term regulatory uncertainty.”
PLUS started appearing across key VectorVest metrics in December 2016, when the shares traded around 320p. While the well-documented regulatory challenges with financial authorities around the globe led to a RS (Relative Safety) rating of just 0.75 – poor on a scale of 0.00 to 2.00, the VST (VST-Vector) indicator, (the master indicator for ranking every stock in the VectorVest database), rates PLUS at 1.32, which is very good on a scale of 0.00 to 2.00. VST is computed from the square root of a weighted sum of the squares of RV (Relative Value), RS (Relative Safety), and RT (Relative Timing). Stocks with the highest VST ratings have the best combinations of Value, Safety and Timing. VectorVest also currently records a current Value of 584p per share for PLUS, indicating that it is undervalued at its current 468p.
The chart of PLUS is shown above over a time span of 3 years and 5 months. As you can see the share has found support at around the 400p level. This horizontal level has been in place since April 2014. In this period the company has increased earnings per share (blue line study in the wondow below price) by 3X. The share is undervalued and is showing a high earnings potential (RV) over the next three years and is on a BUY recommendation as the share rises from a major support level. Technically the next target for the share would be the last old high at 800p which would be close to doubling the present price.
Summary: From an operational standpoint, VectorVest believes the strong numbers announced today show that PLUS has emerged from its not inconsiderable regulatory challenges in fine shape, both financially and in terms of its current operating performances. Up to the end of last year, the stock had been trading at levels in excess of the current VectorVest valuation of 584p, so we fully expect the valuation gap to close in the coming months. Aggressive traders who have experience in managing risk proactively should carefully consider this opportunity. buy.
Dr David Paul
April 26 2017
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