When I look at a stock that‘s soared 90% in the past year, the immediate impression is that I shouldn’t consider buying it as I’ve missed the boat. Yet the exception to this is when the stock still looks to be a good value, meaning that the rally could keep going.
Here’s one FTSE 250 company that could tick this box.
Flying high
I’m referring to Jupiter Fund Management (LSE: JUP). The UK-based investment manager is up 90% in the last year, with a current price-to-earnings (P/E) ratio of 11.40.
The company’s performed well recently for several key reasons. Back in July, it announced the acquisition of CCLA. That business brings £15bn in fresh assets under management, primarily via charity and UK institutional clients. This will help Jupiter scale up its UK business and diversify, which investors viewed positively.
Jupiter’s also reported better investment performance, which helps attract funds and boost investor confidence. For example, in October, quarterly results management celebrated “positive momentum” in retail and wholesale channels. In numbers terms, we’re talking £300m of net positive flows for the quarter.
Finally, the share price gains are significant in percentage terms as the company was trading at a very cheap level a year ago. The active asset management industry in general had been in a rut for a while. For Jupiter, the catalyst for new assets and acquisitions has helped spark a revival.
Why it could still be cheap
The aveage P/E ratio for the FTSE 250 is 13.70. So even with the stock rally, Jupiter still could be seen as undervalued right now, with the ratio of 11.40.
Aside from the P/E comparison, I don’t think investors have fully appreciated the benefits that the CCLA purchase could bring. It enables Jupiter to tap into markets where it traditionally didn’t have a large presence.
Accurately forecasting the size of the new potential market is challenging, but I can see this opening up many doors in the coming years. Ultimately, this could filter down to the business seeing higher profits than currently anticipated.
Another factor to consider is the re-emergence of demand for active management. This year has shown us how volatilty and geopolitics can quickly shift the stock market. I think people are happier now to look to allocate some funds to professional managers like Jupiter. If the trend in higher assets under management continues, it makes the stock look cheap right now.
There are still risks. Much of the future potential success will depend on the performance of the funds being managed. If managers underperform or make poor decisions, it could be a headache for the wider business. Yet overall, I think it’s a stock that’s worth considering by investors.
