Did I miss the boat with this FTSE company?

With so many companies on the FTSE, it can be easy to miss a rally. But is there more growth ahead for this one? Gordon Best takes a closer look.

| More on:

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

I’m always on the lookout for hidden gems in the FTSE. Recently, my attention has been drawn to IntegraFin (LSE:IHP), a company that’s been making waves in the financial services sector.

With the shares soaring by nearly 50% in the past year, I can’t help but wonder, have I missed the boat on this FTSE company?

A great year

IntegraFin, which provides an investment platform for UK financial advisers and their clients, has certainly had a good year. Not only has its 46.9% return comfortably outperformed the wider UK market over the last year, but it’s also left its Capital Markets industry peers in the dust, with the sector averaging a 16.3% return.

This stellar performance may have gone under the radar for many. The company’s been consistently growing its earnings at an average annual rate of 3.5% and boasts an impressive return on equity of 27.4%. With net margins of 37.7%, the firm’s clearly doing something right in a competitive industry.

The fundamentals

Digging deeper into the financials, there’s a lot to like here. The company sports a rock-solid balance sheet with zero debt, giving it significant financial flexibility in a period of high interest rates and general uncertainty. Its latest reported earnings showed EPS of £0.074 for the first half of 2024, up from £0.067 in the same period last year.

Moreover, IntegraFin’s revenue has been growing at an average rate of 8% a year, outpacing its earnings growth. This could suggest that the company’s investing heavily in growth, which I like the sound of.

Am I too late?

With such a strong performance, it’s natural to wonder if the best gains are already behind us. However, there are several factors that suggest IntegraFin might still have room to run.

Despite the recent price surge, the shares are trading at a price-to-earnings ratio (P/E ratio) of 21.9 times, which isn’t excessively high for a company with its growth profile and market position.

Analysts forecast earnings to grow by 8.78% a year, indicating continued optimism about the company’s prospects. IntegraFin offers a respectable 2.9% dividend yield, which is well covered by earnings with a 65% payout ratio. This suggests room for dividend growth.

As an investment platform provider, IntegraFin is well positioned to benefit from the growing trend of digitisation in financial services.

Risks

Of course, no investment is without risks. The business operates in a very competitive industry, and its success has likely attracted the attention of larger players.

Recent regulatory changes in the financial services industry could also severely impact the business model, and any economic downturn could affect the demand for investment services.

To me though, the big concern is that the shares are already overvalued. A Discounted Cash Flow (DCF) suggests the current price is about 6% above fair value. Obviously, this isn’t a guarantee, but it doesn’t inspire me that there’s huge potential, despite what some analysts are forecasting.

I’m staying away

So have I missed the boat on IntegraFin? Perhaps not entirely. This FTSE company seems to have the wind in its sails and, for investors willing to weather potential storms, it might still offer an interesting voyage.

However, I think there are probably more lucrative investments out there, with less risk. I’ll be steering clear for now.

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.

Gordon Best has no position in any of the shares mentioned. The Motley Fool UK has recommended IntegraFin Plc. 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.

More on Investing Articles

Investing Articles

I reckon these 2 penny shares are hidden gems worth a closer look!

Some penny shares are well-known, whereas many others go under the radar, but that doesn’t necessarily mean they aren’t potentially…

Read more »

Investing Articles

Just released: our 3 best dividend-focused stocks to buy before August [PREMIUM PICKS]

Our goal here is to highlight some of our past recommendations that we think are of particular interest today, due…

Read more »

Investing Articles

2 FTSE 100 shares with blockbuster yields investors should consider buying

Our writer has noticed that these FTSE 100 shares offer mammoth dividend yields, and reckons investors should take a closer…

Read more »

Stack of British pound coins falling on list of share prices
Investing Articles

Down 36% and yielding 7.8%, is this FTSE 250 share a bargain?

Christopher Ruane looks at a FTSE 250 share with a sizeable dividend yield and a recent record of dividend growth.…

Read more »

Investing Articles

Is Barclays one of the FTSE 100’s best bargain stocks?

Right now, Barclays' shares are cheaper than those of FTSE 100 rival stocks Lloyds and NatWest. So should I buy…

Read more »

Happy young female stock-picker in a cafe
Investing Articles

Is a takeover offer about to boost the Rentokil stock price, and should I buy?

The Rentokil share price is up 10% on takeover rumours. Is it a stock to buy or one to be…

Read more »

Investing Articles

Here’s my Rolls-Royce dividend forecast for 2024-27!

Our writer considers whether the Rolls-Royce dividend might be reinstated in coming years, based on financial performance and stated payout…

Read more »

Investing Articles

What would I do if Rolls-Royce shares plunged 50%? History suggests a big decline is coming

While Rolls-Royce shares have delivered massive outperformance in recent years, they also have a history of significant declines.

Read more »