Shares in spread betting provider IG Group (LSE: IGG) have been given a boost today by an upbeat third quarter trading statement. Revenue in the quarter reached a new record level of £122m, which is 18% ahead of the same period in the previous year and 9% higher than in the second quarter of the current year.
A key reason for this was the extreme volatility seen in stock markets across the globe, which tends to cause higher customer activity. Furthermore, active client numbers and client first trades also reached new highs for the company, which indicates that as well as favourable operating conditions for IG, its ongoing improvements to marketing capabilities are bearing fruit.
With IG having recorded a share price fall of 4% since the turn of the year, its performance as an investment has been rather poor. And while the third quarter was positive, its near-term performance depends to a large extent on the volatility of the stock market.
As such, it remains a relatively unpredictable business, but with it having a price-to-earnings (P/E) ratio of 16.5 and being forecast to grow its bottom line by 8% next year and 10% the year after, IG looks set to reverse recent share price declines over the medium term.
Also recording a fall in its share price in recent months has been Sports Direct (LSE: SPD). The key reason for this is a profit warning, although the negative publicity of the last year may also have dampened investor sentiment somewhat. And while in the near term Sports Direct could continue to struggle, especially regarding its international operations, its valuation has huge appeal for long-term investors.
For example, Sports Direct trades on a P/E ratio of just 10.4 and although its bottom line is due to fall this year, it’s expected to return to growth next year. In fact, 5% growth is forecast for the 2017 financial year, with 9% growth pencilled in for the following year. And with Sports Direct having a business model that has historically been highly successful and there being the potential for international growth in the long run, its share price slump of 30% since the turn of the year could be reversed in the medium to long term.
Meanwhile, shares in BHP Billiton (LSE: BLT) appear to have begun a comeback, with them rising by 13% in the last three months. That’s at least partly because of an improved outlook for oil and other commodities, although there can be no guarantee that further price rises will be just around the corner. And with BHP’s share price still being down by 46% in the last year, there’s a long way to go before it’s fully recovered.
However, even if commodity prices disappoint, BHP seems to have a sound strategy through which to deliver improved financial performance in the long run. It has cut costs, spun-off non-core assets and mothballed major projects so as to improve cash flow and put it in a stronger position relative to a number of its competitors. With its bottom line set to return to growth next year, there seems to be a positive catalyst to boost investor sentiment yet further.
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Peter Stephens owns shares of BHP Billiton. The Motley Fool UK has recommended Sports Direct International. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.