The London Stock Exchange Group (LSE:LSEG) share price is on the rise at the moment. Earlier today (1 August) it hit a new 52-week high.
As an investor in the financial markets infrastructure and data business (it’s a top-10 holding for me), I’m happy with this rise. However, looking at what’s going on at this company, I think its share price can climb higher.
Nice H1 results
London Stock Exchange Group, or LSEG for short, posted its results for the first half of 2024 this morning, and the market was impressed with the numbers and guidance.
For the period, total income excluding recoveries was up 5.4% year on year to £4.2bn (above estimates) while operating profit rose 9% to £812m. Adjusted earnings per share came in at 174p, up 8.1% on the same period last year, while the dividend was hiked 14.8% to 41p per share.
We have finished the first half strongly, maintaining our momentum in Q2 with every business line contributing to revenue growth.
LSEG CEO David Schwimmer
Looking ahead, the company said it was expecting profit margins to continue improving. It also reiterated its medium-term guidance of mid-to-high single-digit organic revenue growth annually, accelerating after 2024.
Overall, it was a nice set of results from the FTSE 100 company.
Share price potential
As for why I expect the share price to continue climbing, there are a few reasons. One is that the company – which is leading player in the financial data space now – is really innovating at the moment.
The company said today it’s made “significant enhancements” to its Workspace data platform, leading to several competitor displacements. So it looks like LSEG could be set to capture market share from other players such as Bloomberg and FactSet. This could lead to a higher level of growth.
Another is that in recent years, the share price has been held back by selling activity from the Blackstone consortium, who received a lot of stock when LSEG purchased Refinitiv. LSEG told us today however, that the share overhang from this consortium is now under 2%.
Finally, there’s the valuation. LSEG shares are expensive by UK standards. Currently, the P/E ratio here is about 27 (falling to 24 using next year’s earnings forecast). But looking at the valuations of other similar companies including S&P Global (33) and MSCI (37), the stock’s actually pretty cheap on a relative basis.
I’m staying invested
Of course, there are no guarantees the share price will keep rising from here. If we were to see a major slump in tech shares, this stock could underperform, because it’s very much a technology company today.
Another risk is a downturn in the financial markets. This could lead to lower revenues and earnings and share price volatility.
All things considered however, I think this stock has bags of potential. I plan to stay invested in it for the long term.
