The FTSE 250-listed insurance provider Just Group (LSE: JUST) saw its share price sky-rocket after releasing its business update today. With a 17% price increase as I write, the Just Group share price is finally back to the pre-crisis levels of around a year ago.
This is encouraging for a share that saw quite the fall last year. It lost over half its value from the highs seen in February 2020. But I think the important question now is whether JUST can maintain these share price levels and rise from here on.
I believe there are arguments both in its favour and against it.
What favours Just Group
Just Group’s latest performance is clearly something that goes in its favour. Its sales are up 12% and it’s fortifying itself against risks by reducing its exposure to the UK’s property market, as well.
JUST’s also optimistic about 2021. According to the CEO, David Richardson, “We have a strong pipeline of new business and we start the year with increased confidence”.
In the short term, as the bull market continues, I reckon that investors will continue to chase stocks that look promising. JUST is clearly one of them, given its latest results. This bodes well for its share price.
Over the longer term, the company’s focus segment of retirement solutions is likely to benefit it too.
The percentage of the ageing population in the UK has been rising over the past decades according to the Office of National Statistics (ONS). As per the NHS, as life expectancy increases, this trend is only expected to speed up.
Risks to the FTSE 250 stock
The one big reason I’m hesitant to buy the JUST share, despite all the positives, is its financial record. In the last five years, it has been loss-making in two. Its revenues have also been inconsistent.
Unsurprisingly, the FTSE 250 stock’s price trends haven’t exactly been encouraging either. Over the last five years, its share price has clearly been trending downwards. For long-term investors in particular, this is a big red flag, in my view.
It doesn’t pay dividends either, a feature that could make up for (some) share price weakness for me as an investor. It could start paying them again, but their continuity will depend on its financial performance, which hasn’t always been strong.
The upshot
I think it’s possible that JUST’s share price will continue to rise for some time because of both its own performance and investor optimism, but I’m still cautious. At the very least, I’d wait till early March, when it releases its full results for 2020 before making a decision.
In the meantime, I think there are more predictable stocks to buy, which can also return good capital gains over time.