Can this FTSE 100 share price quadruple again?

This FTSE 100 stock has performed fantastically in the past five years. But it has made a very big move. Will it impact its future performance?

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I am talking about the London Stock Exchange Group (LSE: LSEG). And there is a specific reason for asking this question. If I had bought the stock five years ago, it would have actually quadrupled it. 

But what has happened in the past, may not always happen in the future. Or maybe it can. To assess what is more likely, I take a closer look at the stock here. 

Good year for the London Stock Exchange group

Last year was a good one for the company. Both its revenue and operating profit increased, continuing the upward trajectory seen in the past few years as well. In a year when many companies underperformed, the London Stock Exchange Group has not just held ground, it has actually improved its performance. 

Some of this is pure luck. It happens to be in a sector that was not impacted as much by Covid-19 as some of the others. In fact, interest in share trading rose during lockdowns. People had more time than before to engage in stock market investing. It also probably helped that households saved a bigger part of their income than anytime in the past. 

But I would not ascribe the company’s performance to just luck either. It has performed well in the past as well. In the first quarter of this year, too, it has shown improvements. While its total income is down 1.1% from the same quarter last year, in reported terms, this is a misleading number. Reported numbers are published for official purposes. The real indicator of the London Stock Exchange Group’s performance in this case is the constant currency version of income. This shows a 2.4% increase. 

Big and bold acquisition

Moreover, its recent acquisition of Refinitiv could be a good strategic move for it as well. The company provides markets’ data and infrastructure to users across 190 countries. This can hold it in good stead. 

However, all may not be smooth sailing ahead either. The Refinitiv acquisition, for instance, will require work. The group has earmarked a significant £1bn to integrate it. This is in addition to the $27bn price to buy the company, of course. 

At the same time, its share price is elevated. With a price-to-earnings (P/E) ratio of 69 times, it is one of the pricier FTSE 100 stocks right now. And this is after its share price has softened in recent months. 

What is next for the FTSE 100 stock

On balance though, I am hopeful about its future performance. The company has a lot going for it. A big acquisition comes with its own risks, but I think it is a bold move that can be hugely rewarding for it if it works out well. I think it is likely that the London Stock Exchange Group share can rise more, and for that reason I will still buy the stock. But whether it will quadruple or not will depend on how the Refinitiv deal plays out. I think the verdict is still out. 

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 assessed. Consider taking independent financial advice.

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.

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