The FTSE 100 index has inched up over the past few months. It is quite close to its pre-pandemic levels now. But some shares zoomed past these levels long ago. In fact, they are now touching all-time highs. One such is the asset manager Intermediate Capital Group (LSE: ICP).
The share has almost doubled in the past year. While the stock market rally of November 2020 definitely helped, it has also benefited from its own fantastic performance.
I am tempted to buy the share, but I am also intimidated by the amount of share price increase it has already seen. What if I buy it and it stops rising, or worse, starts falling?
Falling relative price
To understand what is most likely to happen, I looked at its relative price over time. Intermediate Capital Group’s price-to-earnings (P/E) ratio was at 11.3 times for its latest financial year, which ended on 31 March 2021. This is actually less than what it was for the year before, 23.6 times. This means that its price rise has not kept pace with its earnings. In other words, in relative terms it is actually cheaper than it was last year.
Further, at a P/E of 11.3 times, the share is far more reasonably priced than most other FTSE 100 stocks today. To me this is a clear indication that the Intermediate Capital Group share price can continue to gain from its current level.
FTSE 100 stock with a bright future
The asset manager, with interests across asset classes like private equity and capital markets among others, is also positive about its performance in the current year. It says that the year has started well. But what I really like is that it appears confident that it can “navigate the evolving and dynamic market conditions”. This is an important remark, I think, as a time when markets are challenged because of Covid-19.
Intermediate Capital Group also pays a dividend that can add to investors’ gains from the stock. At 2.6%, the dividend yield does not qualify it for an income stock, but it is not trivial either.
Should I be careful?
That said, Intermediate Capital Group’s results have not always been buoyant. Its net income actually declined in the years leading up to the year ending March 2021. The same can happen in the future. And the share price reaction could be sharp after a year of stellar growth.
If I’m feeling particularly cautious, I would wait until its next trading statement is released at the end of July. But going purely by its relative price, I think there is still scope for an increase in share price, even though it could be slower to rise. I’m putting this share on the ‘to buy’ list for my portfolio.
