Finally turning a strong profit! Is it time to buy this FTSE 100 stock?

Investment company Abrdn is a FTSE 100 stock that has recently turned profit. Is now a good time for me to invest despite a falling share price?

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The Abrdn (LSE: ABDN) share price currently stands at 239p. The FTSE 100 constituent’s shares have seen a 9% fall in the last month, underlined by a concerning 17% drop this year-to-date. Of course, recent share price decreases can be attributed to the emergence of the Omicron variant and prolonged instability of the pandemic.

However, a decrease in the company’s share price since January 2018 suggests more fundamental problems present. Indeed, Abrdn’s total investments dropped to £1,227m in FY20, a 23% decrease from their past four-year investment peak of £1,597m in 2017. Despite its concerning past, a look at the half-year report for 2021 shows this investment company to have made a strong turnaround recently. Considering this, is now a good time for me to invest in Abrdn?

An impressive turnaround

Previous concerns of year-on-year performance have been left behind in Abrdn’s half-year FY21 report. The company has clearly taken expansive leaps in operation and management.

Abrdn’s acquisition of Interactive Investor for £1.5bn has opened up new segments for its current 400,000 customer base. Such benefits are highlighted in the growth of customer contract revenues from £753m to £853m. This report also shows a 50% cut in expenses from continuing operations, now resting at £938m. An increase in net cash flow from operating activity from £52m to £128m also develops operational health. Such development has resulted in a 7% increase in total equity for the company’s balance sheet – now resting at £10,460m.

Overall, this has led Abrdn to recover from the £504m loss in adjusted profit (after tax) suffered in the first half of FY20. The company now pushes forward with a profit of £150m in this half-year’s report. But is such a turnaround enough to prompt my investment?

Concerning long-term performance

A huge risk underlying the Abrdn stock is its long-term performance. Year-on-year results since FY18 have not inspired strong investment confidence.

Whilst a recent increase in total assets may appear positive, this increase was only achieved due to a 30% fall in total asset value across FY18-20. An investment return decrease, from £163m in FY20 to £71m, is also a very concerning aspect of this company’s performance. Total comprehensive income actually dropped from £1,126m to £233m across the same period.

Compare this to investment competitor Schroders, which has consistently increased total equity since FY18, despite prolonged difficulties with the pandemic. Even before the market impacts of the coronavirus pandemic in late 2019, it is clear that Abrdn’s performance was dwindling. Indeed, this is all reflected in a consistent decrease in share price of over 50% since the beginning of FY18.

Would I invest in Abrdn?

Abrdn has reported a very strong performance this first half-year. A recovery from loss and return to profitability is certainly impressive. However, such a turnaround has sprung from the back of continuous poor performance. A steady decline in the stock’s basic earnings-per-share, dropping from 29.1 in FY18 to 4.8 in their half-year report, evidences the company’s continuous failure.

Despite a return to profitability, the company’s operations have been deteriorating for many years now. Because of this, I will wait for further results and reconsider adding the Abrdn stock to my portfolio in the future.

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.

Hamish Cassidy 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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