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One FTSE 250 Index The stock that caught my eye recently is TP ICAP Group (LSE: TCAP).
This is why I think investors should consider buying some shares.
Miscellaneous Businesses
TP ICAP is a brokerage, data and analytics company serving some of the world's most important industries including financial services, energy and commodities.
I can see that the shares have had a fantastic run over the last 12 months. They are up 43% from 166p at this time last year, to current levels of 238p.
The investment case broken down
If we start with the bullish scenario, at first glance, TP ICAP's fundamentals look good. For example, the stock seems to have a good price-to-earnings ratio at present, with a P/E ratio of eight. Moreover, according to forecasts, the forward P/E ratio of ten also indicates value in the future. However, I understand that forecasts do not always come true.
On top of this, a dividend yield of 6.2% is attractive. However, I am aware that dividends are never guaranteed. On top of this, the company confirmed a £30m share buyback scheme earlier this month, which is positive. It is the third such scheme in the past 12 months.
Looking ahead, analysts expect earnings to rise by around 70% next year. Of course, I'll take these projections with a grain of salt, but at least they show confidence.
Instead, I prefer to focus on TP’s most recent results. A half-year report released earlier this month was a good read in my opinion. Some of the key takeaways for me were that group revenue and EBITDA were up 3% and 7%. In addition, pre-tax profit and earnings per share were up 10% and 8%.
Finally, I am encouraged by TP’s data analytics division, Parameta Solutions. I think this is where the stock could get earnings and return growth. The company is even considering a standalone listing in the US, but I will be keeping a close eye on developments. As the world continues the digital revolution, there could be exciting times ahead.
Risks and my verdict
From a bearish perspective, it should be noted that the company's brokerage business may become obsolete in the future. This is due to changes in technology and the fact that people may stop trading over the phone in favor of smarter ways of working. This could impact investor sentiment and returns. However, at present, the company continues to generate decent profits from this aspect of the business.
Secondly, from a revenue perspective, it is hard to ignore the company's track record and balance sheet. It has had a history of irregular payments and the current debt levels are something I will be watching closely. These debts could hamper profitability as well as growth initiatives.
Overall, in my opinion, the business has a lot of positives, such as a decent valuation and a passive income opportunity to boot. The ace in the hole is the data sector of the business, which could have huge potential in the future and catapult the business to new heights.
