Fintech firm Plus500 (LSE:PLUS) released its 2021 annual trading update today and the results have traders buzzing. The Plus500 share price opened strongly on Monday after ending the financial year ahead of expectations. The FTSE 250 share features a high yield and strong growth over the last two years. But is it the best option for my portfolio right now?
Results round-up
According to the latest update, the trading platform recorded revenue of $718m in the period. Almost $702m of this came directly from subscription and customer trading fees. This points to a high trading volume last year, driven by a steady increase in daily users.
The number of active customers was ahead of pre-pandemic levels throughout 2021, the firm acquiring approximately 196,150 new users. The fintech company has low operational costs that boosted earnings before interest, taxes, and amortisation (EBITA) to $387m.
The FTSE 250 share also boasts of a high dividend yield of 7.3%. Another encouraging sign for future dividends is that its revenue grew at a compound annual growth rate (CAGR) of 32% a year over the past five years. And its current yield is covered 2.8 times by earnings, which is a positive.
The share buyback programme was updated recently and stood at $12.6m on 29 October. The programme is already under way and a $10.8m buyback has already been rolled out. The board has also hinted at the possibility of a new buyback after the current programme is completed. It’s important to note that buybacks have been a feature of Plus500’s shareholder-first approach since 2017.
The company has also diversified into crypto investments and offers over 2,000 financial investment instruments. It recently included sector indices as well.
Should I buy?
The last 24 months have brought in a lot of new traders. Forced to work from home, young investors switched on to investing in record numbers in the last two years. And the explosion in the popularity of cryptocurrencies is a huge boost for Plus500. High market volatility is good for the business as customer trading activity increases. In the first few months of the pandemic between January and June 2020, revenue increased from $148m to $564m.
The new trading update means the stock is trading at a very cheap price-to-earnings (P/E) ratio of six times. And I think the higher volatility in the crypto market is a great asset for Plus500. It bolsters buying volume and the constant flip between fear and greed in the crypto space means more investors are likely to try and buy a dip or ride a high.
But the business operates in an extremely crowded space with more platforms with feature-rich packages available on the market every day. And several countries are considering regulating the crypto trade, which could cut into revenue. The company is also investing heavily in marketing and R&D and has announced a $50m, incremental R&D investment for three years. But I think investor interest could wane if future revenue is affected by huge R&D spending.
However, the firm has a very low-cost operation, a good dividend history and financial performance to back it up. I am watching this FTSE 250 share closely and would consider adding it to my portfolio in 2022.
Suraj Radhakrishnan 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.
