Should I sell Plus 500?
Share price is £14.58. Market cap £1.55bn. Revenue and profit are quite lumpy. Data for the last few years from their website:
| Year ending 31 December | 2015 | 2016 | 2017 | 2018 | 2019 | H1 20 |
|---|---|---|---|---|---|---|
| Revenues | $275.6m | $327.9m | $437.2m | $720.4m | $354.5m | $564.2m |
| Revenue Growth (%) | 20% | 19% | 33% | 65% | (51%) | 281% |
| % active customer growth | 29% | 14% | 103% | (4%) | (34%) | 132% |
| EBITDA | $132.9m | $151.0m | $259.2m | $506.0m | $192.3m | $361.8m |
| EBITDA Margin (%) | 48% | 46% | 59% | 70% | 54% | 64% |
| Profit Before Tax | $127.9m | $152.0m | $253.4m | $503.0m | $189.3m | $363.2m |
| PBT Margin (%) | 46% | 46% | 58% | 70% | 53% | 64% |
| Net Profit | $96.6m | $117.2m | $199.7m | $379.0m | $151.7m | $320.0m |
| Net Profit Margin (%) | 35% | 36% | 46% | 53% | 43% | 57% |
Average post-tax margin of 44%. Average revenue $486m. Obviously H1 2020 was extraordinary, we can't expect that to continue. If we assume a return to the mean of the last 5 years then we can expect net profit of £160m per year, putting it on a P/E ratio of just under 10.
Their financial statements are very clean. The balance sheet is free of intangible assets and goodwill - no acquisitions and they don't capitalize development costs for their software. As a result these earnings translate directly into free cash flow and can be used for dividends and share buybacks.
All is not entirely rosy however. Their margin tends to be higher when revenue is higher, so if revenue falls short of expectations then there is a proportionally greater impact on profit. They have a high rate of customer churn and have to constantly spend money on marketing to attract new customers.
They are subject to a lot of regulation. Selling CFDs to retail punters attracts a lot of scrutiny, for good reason - 80% of their customers lose money. They've weathered various regulatory crack-downs in the past, but at some point the business they're in may simply become unsustainable.
At the end of all that I'm still sitting on the fence. They look reasonably cheap at current levels, but the future is uncertain. I don't think I want to hold these shares long-term. I'm not convinced the company will still be around in 20 years time. This isn't a business I particularly believe in - it's not offering a service that people need, it's simply leaching money from gullible members of the public.
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