IG Group puts in "resilient" Q1 performance, says Shore Capital

Shore Capital has reiterated its 'buy' recommendation for shares of IG Group after the online trading platform's "resilient" first-quarter performance, estimating a big share-price recovery.

In the quarter to the end of August, total revenue nudged up to £242.9m from £241.8m in the same period a year earlier.

Shore Capital analyst Vivek Raja pointed out trading conditions were "softer", but the 4% drop active client numbers was "resilient" in the context of lower market volatility.

With IG's reaffirming its medium-term targets, Raja said Shore Capital's forecasts aren't changing at this stage.

IG's stock is now down 14% since the start of the year, and while full-year results in July led to a temporary bounce in the shares, the stock has fallen 9% since then. "Sure, trading conditions have been softer over the past few months, though the issues CMC has faced don’t really apply to IG," Raja said.

The stock trades at just 7 times earnings with a dividend yield of 7% and a free-cash-flow yield in the mid-teens, which offers "far better value than CMC", Raja said.

"IG’s valuation is near historical lows despite resilient EPS momentum over the past three years. Meanwhile, the company continues to exercise a rolling share buyback programme to utilise part of its significant excess liquidity, which itself is supported by strong cash generation. Our prevailing fair value estimate of 1,250p suggests deep value."

The stock was up 1.6% at 678.5p by 1033.