Plus500 (LSE: PLUS) is an online trading platform that allows customers to trade Contracts for Difference (CFDs) on a variety of products such as currencies, commodities, equities, and more.
With the volatility in global markets created by the Covid-19 pandemic, this gem of a growth stock has already seen record profits, and I think there is plenty of room for this trend to continue into the next 18 months and beyond.
Recently the company announced a pre-tax profit of £278 million at its interim results, up more than 280% from the same time last year. In line with this performance, the company has tripled its interim dividend to 95 cents a share from 27 cents, resulting in a current dividend ratio of 3.4%.
In addition to its recent success due to current economic conditions, Plus500 has also made progress towards being one of the leading CFD providers within the UK, by continuing to improve customer experience by continuously adding financial instruments to its platform, increasing the variety of statistical analysing tools on its software, and by listening to customer feedback to update its interface. These actions are reflected in the record number of new customers, up 317% from this time last year. Customer retention is also good, with 65% of the interim results revenue coming from customers who have traded with Plus500 for over the past 12 months. These factors place Plus500 in a strong position where I can only see customer retention and growth continue to improve.
Short term, with the real prospect of a second wave of Covid-19 infections, the UK’s new lockdown measures and the ever-changing quarantine restrictions for international travel, I see the volatility in markets continuing to be high and I can’t see any let up until at least 2021, as every week assets such as currencies, gold and oil swing to record levels, further fuelling demand for Plus500’s products.
Longer term, with the advent of the smartphone and the increased de-regulation of investment platforms, I see the demand for Plus500’s services increasing as more users become aware of and access CFD providers.
Plus500’s share price is currently trading at around 1,500p per share, down from an all-time high of 2,040p in August 2018, with that year also being a record year for profit. If this year’s current trend continues as it is, which I see no reason for it not too, Plus500 will be on track to make 2020 its record year, at a time when other industries are suffering due to the disruption created by the Covid-19 pandemic. For these reasons I would buy £3,000 of Plus500 shares.