Lion Finance Group (LSE:BGEO), formerly Bank of Georgia, is a FTSE 250-listed banking group. Many investors will know it because of the phenomenal growth it’s achieved in recent years. It may even be realistic to assume this Tbilisi-based bank could be on the FTSE 100 in a few years.
Let’s take a closer look at this stock.
Valuation’s very strong
Banks typically reflect the health of the economies they serve, hence why they’re typically cyclical in nature. The Georgian economy’s been one of the fastest growing in Europe since the pandemic and the stock’s surged from lows when Russia invaded Ukraine. While investors were, at first, concerned Georgia may be drawn into the conflict, the country’s neutrality has positioned the economy well.
The forecasts, while noting a dip in earnings in 2025, suggest a strong onward trajectory. Over the three years from 2024 to 2027, the annualised earnings per share (EPS) growth rate’s about 3.5%, reflecting both the temporary setback and the recovery that follows.
For investors, it’s helpful to look at the dividend adjusted price-to-earnings-to-growth-yield (PEGY) ratio. This compares the company’s valuation to its expected growth and dividend yield.
Lion Finance’s forward price-to-earnings (P/E) ratio for 2025 is 4.94. When this is divided by the combined annualised EPS growth rate (3.5%) and the dividend yield (4.5%), the PEGY ratio is 0.62.
A PEGY below one suggests that, even after accounting for the slower growth in 2025, the shares offer good value relative to their growth and income potential. This means that, for investors seeking both capital appreciation and dividend income, Lion Finance Group could be an interesting long-term opportunity.
But there’s a ‘but’
I sold my shares in Lion Finance Group after a good run, but I was concerned about geopolitics. For starters, banks, like other stocks, typically have valuations linked to the countries and sectors they serve. US banks are typically the most expensive given the long-term outperformance of the US economy. British banks, now resurgent, are less expensive than their American counterparts, but more expensive than their emerging market peers.
As such, we shouldn’t be overly surprised to see this Georgian bank trading at almost a 50% valuation discount to British counterparts. Georgia, even before the recent turmoil, doesn’t offer the relative safety and security of the UK — in investment terms.
What’s more, Georgia has experienced ongoing protests over the past nine months following a hotly contested election. And this is important because as investors we want stability. Businesses, especially banks, perform better when economies look stable. A perfect example is the UK with the country’s fortunes improving over the past two-and-a-half years and the valuation of banking stocks surging.
In other words, Lion Finance may be cheap for a reason. But that doesn’t mean it’s not worth considering.
