Up 394% in 3 years, can this FTSE 250 stock go higher?

Over the past three years, this stock has surged nearly 400%, putting it among the best performing stocks on the FTSE 250. Can it continue?

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Bank of Georgia (LSE:BGEO) just keeps on surging. The FTSE 250 stock sank during the pandemic and again when Russia invaded Ukraine, but the share price has soared to new heights. It’s now up 70.1% over 12 months, 363.6% over 24 months, and 394.6% over three years.

It’s among the best performing companies on the index.

Could it continue?

Bank of Georgia is currently trading at just 5.3 times earnings base on the figures from last reported year — 2022. That’s a lower multiple than even the poorly performing UK banks. There’s an obvious reason for this. Investors are wary about investing in a bank that serves an economy they know little about.

The Bank of Georgia’s growth has reflected improving sentiment that Georgia would not be caught in the crossfires of the Russo-Ukrainian war, but also improving earnings. In fact, the Bank of Georgia has performed better than almost anyone expected.

From a valuation perspective, there’s little reason to believe this surging stock has peaked. US banks often trade with multiples double 5.3. From this perspective, it’s definitely possible that the Bank of Georgia could go higher, with the caveat that investors will be naturally hesitant about investing in an economy they’re unsure of.

However, it’s also worth recognising that a further rise in the share price could be driven by improving earnings. Analysts are expecting basic earnings of £9.13 per share for 2023. It’s then expected to rise to £10.68 in 2024, and £10.91 in 2025.

Incidentally, those earnings for 2024 and 2025 are greater than the price I paid for the stock in 2022.

Why I sold

I like to let my winners run, but I sold my holdings in Bank of Georgia and peer TBC Bank — possibly too early. So why did I do this?

Well, while Georgia is among Europe’s fastest growing economies, possibly the fastest, the country is facing some challenges. One of these relate to the Russia-Ukraine war.

The ruling Georgian Dream party hasn’t taken a defiant stance again Moscow, preferring not to anger its largest trading partner. The country has also received tens of thousands — maybe more — Russians, who have taken up residence in Tbilisi.

This has only served to escalate the political tensions that exist in the country. What’s more, the country is due to go to the polls on 26 October.

The thing is, banks reflect the health of the economy. And if there’s economic uncertainty, potentially caused by political upheaval, then we may see some downward pressure on the Bank of Georgia share price.

Of course, I could be wrong. But having already seen plenty of growth on my investment, I didn’t think it was worth the risk.

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.

James Fox 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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