Is this financial stock set to rise by 30%+ following today’s update?

Plus500 (LSE: PLUS) has today released interim results for the six months to 30 June. They show that the company is making good progress and provide guidance as to whether it’s now a better buy than financial services sector peers such as Barclays (LSE: BARC) and Prudential (LSE: PRU).

But can surging sales and customer numbers translate into a surging share price?

Plus500 posted sales growth of 25% versus the same period of last year as its new customer numbers grew by 9% to 56,929. But the online provider of contracts for difference (CFDs) was unable to deliver such a strong growth in its profitability. Its earnings before interest, tax, depreciation and amortisation increased by just 6%.

This was due to a higher than expected number of new customers that suppressed EBITDA margins due to the acquisition and on-boarding costs incurred prior to generating revenues from the new customers. Once those costs have been incurred, they’re expected to benefit the company’s bottom line over the medium-to-long term and excluding such costs, Plus500’s EBITDA margins were a healthy 50%-plus.

Its market share increased during the period and partly due to this, it’s expected to record a rise in earnings of 18% in the current year, followed by further growth of 5% next year. This puts it on a price-to-earnings growth (PEG) ratio of 1.8, which indicates that its shares are rather fully valued at the moment. Certainly, Plus500 has excellent long-term growth potential but following a 70% rise in 2016, its shares may struggle to rise by a further 30%.

Upward rerating potential?

However, there’s still excellent value for money on offer elsewhere in the financial services sector. For example, Barclays is expected to increase its bottom line by 55% next year as its turnaround strategy begins to bear fruit. This puts it on a PEG ratio of only 0.2, which indicates that upward rerating prospects are high.

Furthermore, Barclays is now focused on improving the strength of its balance sheet at a faster pace than previously. While this means that dividends have been cut, Barclays should become a stronger and more profitable bank with a lower risk profile in the long run.

Similarly, Prudential has the scope to rise by more than 30%. It has a PEG ratio of 1 due in part to its growth forecast of 11% for next year, and also because its shares have a price-to-earnings (P/E) ratio of only 12. This indicates that there’s major upward rerating potential on offer since Prudential has a strong position within the lucrative Asian market.

Financial services products are expected to enjoy a period of intense growth as incomes rise across Asia and Prudential could therefore enjoy a tailwind over the coming years. As well as a diversified business and a sound strategy, this means that now is a good time to buy it ahead of potential 30%-plus gains.

Do you hold the best stocks in your portfolio?

Of course, finding stocks that are worth adding to your portfolio is a tough task, which is why the analysts at The Motley Fool have written a free and without obligation guide called 10 Steps To Making A Million In The Market.

It's a simple and straightforward guide that could make a real difference to your portfolio returns. As such, 2016 could prove to be an even better year than you had thought possible.

Click here to get your copy of the guide – it's completely free and comes without any obligation.

Peter Stephens owns shares of Barclays and Prudential. The Motley Fool UK has recommended Barclays. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.