Lion Finance is a soaring FTSE 100 growth stock that still looks absurdly cheap

Lion Finance (LSE:BGEO), previously Bank of Georgia, has been one of the FTSE 100’s stronger growth stocks this year. Yet it still trades on a forward price-to-earnings (P/E) ratio of just 7.3, and a P/E growth (PEG) ratio of roughly 0.3 – far below average.

That looks odd for a bank generating a 27.2% return on equity (ROE). Is it possible the market’s being a bit harsh assuming geographic or political risk in Georgia?

Possibly. But the 6% price jump after its recent third-quarter results suggests otherwise, so maybe investors are beginning to reassess the story.

I decided to take a closer look.

Growth isn’t slowing

This isn’t a one-quarter rebound – profit rose 21% year on year to GEL661.9m (£191.8m) in Q3 2026. Meanwhile, net operating income rose 19.6% despite a 9% increase in operating expenses. That pushed the cost-to-income ratio down to a record-low 32.1%, from 35.2% a year earlier.

Loan growth was also strong. The group’s loan book expanded 24.6% year on year in constant currency, well ahead of management’s medium-term target of about 15% a year.

The key takeaway: Lion Finance isn’t only growing quickly, it’s also becoming more efficient. That’s a combination that should support compounding growth for years to come.

Why the valuation looks cheap

With such a low P/E and PEG ratio, I think Lion Finance is worth considering from a valuation perspective – and I’m not the only one. Analysts expect revenue growth of about 15% in 2026 and 13.9% in 2027, with an average price target of 15,260p – roughly 11% higher than today’s price (13 November).

Growing dividends and a moderate 2.5% yield also add value. The recent interim dividend was raised 23%, and the company extended its buyback programme by £17.9m. It’s now targeting a 30%-50% payout ratio through dividends and buybacks, supported by an ROE above 20% and medium-term loan growth of about 15%.

So why the low price? Political uncertainty in Georgia explains some of the price suppression, but the bank’s profitability, digital adoption and capital returns shouldn’t be overlooked. The business has more than 2.4m monthly active digital users, and it’s adopting impressive technological innovation.

While that gives the valuation more support than simply being ‘cheap’, a low P/E isn’t automatically a bargain for a bank. Earnings can be cyclical, and credit losses can rise if economic conditions deteriorate.

Which brings us to…

What could go wrong

Regional macroeconomic risks are the core concern, including currency movements, geopolitical uncertainty and potential credit-cycle deterioration.

For now, loan growth’s ahead of management’s medium-term target, but that could eventually normalise. It expects around 10% growth in Georgia and 20% in Armenia over the medium term, but that isn’t guaranteed.

If growth tapers off, today’s ‘low’ valuation becomes less attractive. As such, I’ll be keeping an eye on credit costs, which have remained low so far but could rise if lending standards loosen or economies slow.

My take

Lion Finance isn’t risk-free but I think the market may be underestimating the quality of the business. To recap: the price is only 7 times forward earnings, with a 27% ROE, strong capital returns and continued loan growth.

For investors looking for diversification beyond familiar UK blue-chips, I’d say it’s one of the more interesting growth-and-value opportunities on the FTSE today.

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Mark Hartley does not hold any positions in the companies mentioned.