As the price of Bitcoin has slumped over the past 12 months, the chances of investors being able to double their money investing in the cryptocurrency have diminished. Supporters have moved on, and projects working to increase the use of Bitcoin have collapsed.
With this being the case, I think now could be the time for investors to dump Bitcoin and move on to other investments.Â
Today, I’m going to look at one FTSE 250 stock I believe has the potential to double your money over the next 12-24 months.
Emerging growth
One of Europe’s greatest economic success stories in the past decade has been Georgia. Economic growth (GDP growth) in the former Soviet Republic averaged 5.4% between 2004 and 2018, reaching an all-time high of 13.9% in the third quarter of 2007.Â
In the first two quarters of 2018, the economy expanded by more than 5%, although growth slowed in the third quarter to around 4%. Despite this, the small eastern European state still has one of the fastest growing economies in the world. Only a few economies managed to report a GDP growth rate of more than 5% last year, and the world average was just 2.7%.
The country’s financial services industry is by far the fastest growing segment of the economy. Activity in this economic sub-sector expanded 15% year on year in the third quarter of 2018, and one of the biggest beneficiaries of this boom is Bank of Georgia Holdings (LSE: BGEO).
Exploding earnings
FTSE 250-listed bank today announced a 13.3% year-on-year increase in revenues and a 23% profit before non-recurring items. Profits were boosted by an explosion in lending. Loans to customers increased 21.4%, while client deposits increased 14.9%. The group’s net interest margin — the difference between what it pays depositors and charges borrowers — was 6.5% for 2018 as a whole. For some comparison, Lloyds Group’s net interest margin is less than 3%.
Despite this growth, shares in the bank are currently dealing at a forward P/E of 6.3. Usually, when a bank is trading at such a low multiple, it’s a sign that there’s something wrong with the business. However, I cannot see any reason why investors are giving the stock a wide berth.
Profits are growing, demand for borrowing is rising, its capital ratio of 12.2% is adequate, and the group’s return on average equity was 26% last year, around double what most UK banks are achieving. And on top of all these attractive qualities, the stock supports a dividend yield of 4.4%.
Double your money
Considering all of the above, I think shares in Bank of Georgia are seriously undervalued. The rest of the UK banking sector is trading at a forward P/E of around 9, which suggests that the group is undervalued by around 30%. That being said, I think the stock deserves a premium multiple to the rest of the UK banking sector considering its sector-leading return on equity and net income margin, as well as the growth outlook, which is substantially better than most UK banks.
I would be willing to pay as much as 12 times forward earnings for this company, which implies a potential upside of around 100% from current levels — excluding dividend income.