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Spreads and stocks broker IG Group Holdings (LSE: IGG) has been a losing trade lately, its share price trading 18% lower than a year ago. This morning’s update has done little to change that, with the share price creeping up just 0.92% time of writing. However, management remains confident of a bright future, and things might soon start turning back in its direction.

Low IG

Today’s update said that IG has built on its “strong first quarter,” continuing to perform well in Q2 with net first-half trading revenue expected to rise 9% year-on-year. Operating costs excluding variable remuneration should fall around 7%, primarily due to lower advertising and marketing spend. IG maintains July’s guidance that full-year operating costs are expected to be similar to FY 2017’s.

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The main source of uncertainty is the timing of potential regulatory changes in the UK and EU, which management says remain unpredictable this year and beyond. In January, the European Securities and Markets Authority delivers its review of the leveraged trading market, with the UK Financial Conduct Authority deferring its own proposals in order to harmonise any changes.

January moves

This uncertainty is partly reflected in the price, with the stock trading at a discounted forecast valuation of 13.2 times earnings. The income on offer is an impressive 5.3%, covered 1.4 times. Operating margins are healthy at 43.8%. Earnings per share (EPS) are forecast to rise 6% in the 2018 financial year, but watch out, City analysts are pencilling in a 4% drop in 2019. IG has delivered five consecutive years of steady EPS growth but January might give us more clarity, and a better buying opportunity. Alternatively, you might find better bargains elsewhere today.

Commercial vehicle hire company Northgate (LSE: NTG) has also gone into reverse lately, its share price falling 21% in the last six months. The £553m company suffered a nasty prang in June on publication of its full-year results which showed pre-tax profits falling almost 7% from £77.6m to £72.2m. Management pinned the blame on a lower number of vehicles on hire and an adverse impact of £5.7m from changes in depreciation rates.

Northgate star

Its stock is trading 2.12% lower today on publication of its interim results for the six months to 31 October, despite reporting strong growth in Spain and a slowing decline in vehicles on hire in the UK, plus “good progress against strategic initiatives”

Northgate’s revenue increased 10.4% to £349.7m but underlying profit before tax fell more than 16% to £33.8m, partly due to the adverse impact from previous changes in vehicle depreciation rates. Profit before tax also fell 22% to £40m and underlying basic EPS were down almost 20% to 20.7p. Looking at these numbers, I am surprised the market response was not harsher. Other soaring growth stocks could be more exciting right now.

Motoring on

Northgate’s current lowly valuation of 9.4 times earnings may explain why. Investors have already discounted a van load of bad news. City analysts have been forecasting a 5% drop in earnings per share in 2018, but the future looks brighter with a predicted 7% rise in 2019. The yield is a forecast 4.4%, covered 2.5 times, and a healthy cash balance sheet and strong cash generation bodes well for future progression. It could make you richer, given time.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Northgate. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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