One FTSE 250 stock I’d buy and one I’d sell today

It’s time to sell this struggling FTSE 250 stock as the coronavirus crisis rumbles on, and buy its thriving peer instead, says Rupert Hargreaves.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Some FTSE 250 stocks have struggled in the coronavirus crisis. However, others have thrived. There’s one company, in particular, that’s seen business explode over the past few months.

FTSE 250 growth champion

Online trading platform Plus500 (LSE: PLUS) has benefited from the market volatility we’ve seen in 2020. Its latest update shows total group revenue for the first half of 2020 was $564.2m, that’s compared to just $148m in the same period last year.

Inflation Is Coming

Inflation is out of control, and people are running scared. But right now there’s one thing we believe Investors should avoid doing at all costs… and that’s doing nothing. That’s why we’ve put together a special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation… and better still, we’re giving it away completely FREE today!

Click here to claim your copy now!

A record number of new customers signing onto the platform also helped the group achieve a record number of active customers. Some 198,176 new customers were onboarded during the first half of 2020, that’s three times higher than the same period last year.

These numbers suggest the FTSE 250 growth champion is in for a bumper 2020. Analysts have been raising their forecasts for growth for the group over the past few weeks. They now expect Plus to report earnings growth of nearly 90% in 2020. These figures don’t include today’s trading update. So I wouldn’t rule out an upward revision to this growth projection over the next few weeks.

Nevertheless, based on this growth forecast, the stock is trading at a forward price-to-earnings (P/E) multiple of just 6.6. That’s compared to the financial services sector average of 15.

Therefore, the stock would appear to offer a wide margin of safety at current levels. As such, now could be an excellent opportunity to snap up a share at a discounted valuation.

Micro Focus

While I’m a buyer of FTSE 250 growth champions Plus, I think it may be best to sell struggling former tech star Micro Focus (LSE: MCRO).

Several years ago, the company bit off more than it could chew when it acquired HP’s Enterprise division. This business has been a thorn in the group’s side ever since.

In its latest update, Micro Focus announced yet another round of losses linked to the deal. Earlier this year, it also lost its legendary CEO Kevin Loosemore, who left after 15 years of building the business.

While management continues to believe the company has bright prospects, I’m not so sure. The FTSE 250 tech stock has been struggling to turn itself around for years. So far, there’s been little success.

At the same time, shareholders have had to deal with a dwindling share price. The stock is down around 60% since the beginning of the year. What’s more, management has also been forced to severely curtail shareholder payouts, which has significantly impacted total returns.

As it looks as if the business may continue to struggle for some time, it might be best to avoid the stock for the time being. Even though it seems cheap after recent declines, there’s no guarantee the FTSE 250 investment will be able to return to growth any time soon.

Investors could be better off buying proven growth champions such as Plus instead.

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended Micro Focus. 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.

Should you invest the value of your investment may rise or fall and your Capital is at Risk. Before investing your individual circumstances should be considered, so you should consider taking independent financial advice.

More on Investing Articles

Hand of person putting wood cube block with word VALUE on wooden table
Investing Articles

I wouldn’t buy Bitcoin today. FTSE value stocks look much better value to me

Now looks like a promising time to buy UK value stocks, while Bitcoin still looks far too risky for me.

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

The Rolls-Royce share price is below 85p. Here’s what I’m doing!

The Rolls-Royce share price has suffered this year. Trading for below 85p, this Fool decides whether this is an opportunity…

Read more »

A young woman sitting on a couch looking at a book in a quiet library space.
Investing Articles

4 dividend stocks to buy as inflation soars!

I'm hunting for the best dividend stock to invest in as global inflation soars. Here are several high-dividend-yield shares that…

Read more »

Happy young female stock-picker in a cafe
Investing Articles

UK shares to buy now: 3 big fallers I’d snap up

Our writer thinks this trio of strong business performers could be attractive UK shares to buy now for his portfolio.

Read more »

Lady researching stocks
Investing Articles

Could a falling stock market help me get rich?

When the stock market falls, what does it mean for our writer's portfolio? Here's why it could be an opportunity.

Read more »

Hand holding pound notes
Investing Articles

Should I buy these two 12%-yielding dividend shares for my Stocks and Shares ISA?

Do these double-digit dividend yielders offer our author the right balance of risk and reward for his Stocks and Shares…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 reasons to buy Lloyds shares at 43p

Our writer outlines three factors that make him bullish on Lloyds shares, as well as one noteworthy risk facing the…

Read more »

Tabletop model of a bear sat on desk in front of monitors showing stock charts
Investing Articles

How I’m investing my money in this bear market

Bear markets can present amazing opportunities for long-term investors. But a cautious approach is sensible, says Edward Sheldon.

Read more »