The UK’s flagship mid-cap index, the FTSE 250, plummeted by 41% in the depths of the market crash. Since then, however, the index has risen by around 34%. Now, it sits just 20% down on the beginning of the year.
The performance of the FTSE 250 is closely linked to that of the UK economy as many of the listed companies have a domestic focus. As a result, the index is usually more volatile than its blue-chip counterpart, the FTSE 100. This partly explains why it suffered to a greater extent in the recent sell-off. That said, one FTSE 250 company that has bucked the trend is online trading services firm Plus500 (LSE: PLUS). With that in mind, could the company be one of the best UK shares to buy now?
Success in the midst of a global pandemic
The Plus500 share price has performed exceptionally amid the wider market turmoil. Following a 23% drop in early March, the company’s valuation has risen by 89%. From humble beginnings on the AIM market in 2013 to a listing on the main market of the London Stock Exchange in 2018, it’s been a story of success for the six Israeli students who founded the company back in 2008.
The online financial firm offers the ability to trade cryptocurrencies, forex, contracts for difference and options. On top of this, traditional investment instruments such as shares and ETFs are also available. The company has continually improved and enhanced its trading platform over the years, and it is now more accessible than ever.
Moreover, I was impressed by the online spread-better’s recent announcement that revenues had almost tripled in the second quarter of 2020. It seems that the combination of lockdown plus volatile market conditions provided fertile ground for Plus500.
Bumps along the road
However, Plus500’s journey to the main market hasn’t been without its fair share of bumps along the road. In 2012, the FCA issued a £205,000 fine for breaching transaction reporting rules. Again in 2015, the FCA stepped in to freeze UK customer accounts while it reviewed lax anti-money laundering controls. Both events had a substantial impact on the company’s valuation.
Since then, company directors have made significant hires, including in the areas of compliance and account management. This should help prevent any similar mishaps from occurring in the future.
A bright outlook for the future
If Plus500 can successfully retain the new influx of customers caused by the recent heightened market volatility, the future outlook will be immensely positive. With retail trading already gaining in popularity, the company looks set to profit over the long term.
Regulatory challenges in the markets where Plus500 operate undoubtedly pose a threat. Nevertheless, I’m confident that the company remains in a strong position. Widespread geopolitical tensions and macroeconomic uncertainty mean that financial markets could remain volatile for the foreseeable future. While this comes as bad news for most, it provides an ideal opportunity for the firm to press on with its exceptional performance.
With analysts across the board raising their forecasts for the company’s growth in 2020, a price-to-earnings ratio of 12.8 indicates the shares could be undervalued. Additionally, a dividend yield of 3.8% sweetens the deal in my eyes. As such, I reckon the company could truly be among the best UK shares to buy now for a combination of capital growth and dividend income.
Matthew Dumigan has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.