I’ve spent years ignoring Plus500 (LSE:PLUS) because it seemed little more than a volatile trading platform business. With AI, defence and other obvious growth names filling my feed, this FTSE 250 company failed to capture my attention.
Many investors probably still see it that way – an uncertain tech play in a risky sector. That’s understandable. Retail trading can be cyclical, and regulators keep a close eye on the sector.
But the numbers are getting harder to ignore.
After digging deeper, I see a company growing beyond just an online trading app. It’s becoming a diversified international retail-trading platform, and the market may still be judging it by its past.
Why the market may be wrong
In its latest Q3 update, Plus500 lifted its guidance after revenue rose 11% to $203.2m and EBITDA rose 7% to $88.4m. The company now expects full-year revenue and EBITDA to exceed consensus forecasts of $837.6m and $358m, respectively.
But the most telling metric was customer growth, up 27% to 28,747. Meanwhile, Average User Acquisition Cost (AUAC) fell 14% to $1,150. More users for less money.
The fresh funds are being funnelled into an aggressive expansion. Two conditional acquisitions include US broker-dealer Hedge and Brazilian broker Guru. If these deals go ahead, it would give Plus500 regulated access to two fresh and lucrative growth markets.
On top of that, a US multi-asset app, planned for the first quarter of 2027, could be a massive game-changer.
Three growth engines
Plus500 now has three potential growth engines. The first is its core trading platform, which still generates strong cash flow. The group ended September with more than $775m of cash and no debt, after paying $87m in dividends and completing around $64m of buybacks during the quarter.
The second is the US. Products outside the traditional over-the-counter business already account for around 16% of revenue and 31% of new customers. That suggests it’s diversifying beyond its original model.
The third is Brazil and Latin America. Guru would give Plus500 its first local operations in the region, opening a growing retail-investing market.
And all this hasn’t gone unnoticed by brokers, with Panmure Liberum maintaining a Buy rating and a 5,400p target — roughly 61% growth from today.
At 11.5, its price-to-earnings (P/E) ratio’s already below the long-term UK average. If it manages just half of its expansion goals, today’s valuation could look remarkably modest in hindsight.
The risks I can’t ignore
Like any stock, Plus500 isn’t risk-free. Trading revenue can swing with market volatility, and regulatory scrutiny remains a structural risk for retail-trading businesses.
The US and Brazil plans will be costly, requiring careful integration and customer acquisition. Earnings growth’s already trailing revenue growth, so execution needs to go smoothly or it could impact profits.
But if it all goes to plan, an indifferent market may miss a serious growth opportunity.
My verdict
Plus500 may not be the FTSE 250’s most fashionable stock, but the numbers deserve a closer look, in my opinion. For growth hunters, the guidance upgrade, cash generation and international expansion are compelling.
But for now, I’d only consider a small allocation until confirmation of the US launch before thinking bigger.
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Mark Hartley does not hold any positions in the companies mentioned.
This story originally appeared on Motley Fool
