CMC Markets – Undervalued with a good dividend income or sinking ship?

CMC Markets – Undervalued with a good dividend income or sinking ship?

Dale Seweryn 7 articles 

Trader – FX, Equities & Indices.

 

 

A brief overview

CMC Markets plc is a holding company. The Company is a provider of online and mobile trading servicing both retail and institutional clients. The Company enables clients to trade over 10,000 financial instruments, including indices, commodities, foreign exchange (FX) and equities through its trading platform. It operates through three segments: UK and Ireland (UK & IE), Europe, and Australia, New Zealand and Singapore (APAC) and Canada. Clients can trade the markets via contracts for difference (CFDs), financial spread bets (UK and Ireland segment only). With the Company’s spread bet, a client bets a specific stake size per point movement of a product, rather than trading a specific number of shares or units. It also offers Australian wholesale and retail clients the ability to buy and sell Australian Securities Exchange (ASX) and SSX (formerly APX) listed products and managed funds.

Technicals

The CMC Markets chart does not make good reading material for 2018 investors of the stock. We have potentially found a support level at £0.75 per share as we have seen price reject this level on multiple occasions. Currently, price is down 57% from this time last year. Short term we could see the price reach the resistance level at £1 per share, following this longer term we could reach £1.30 – £1.40 per share based on the technical levels illustrated on the chart below.

Fundamentals

Like most online trading companies, CMC Market’s share price has declined due to the introduction of ESMA and less than ideal trading conditions. There is however some light at the end of the tunnel with the company reporting that client money has remained stable and the group have confidence in the consensus full-year 2020 outlook. 3 out of 5 brokers rate the stock as a buy.

CMC markets has a PE ratio of 4.57 which is low in comparison to the market average (16.3) and sector average (17.4) which would represent good value. The intrinsic value based on future cash flows, also makes for positive reading with the company showing as undervalued, however I would take this with a pinch of salt as £2.39 per share is ambitious to say the least.

It is also worth noting that the company offer a 9% dividend which is yet to be paid in 2019. On the negative side the CEO’s compensation has increased by more than 20% whilst earnings have fallen by a similar amount which does ring some alarm bells, as his overall compensation is higher than average for companies of this size.

Conclusion

In conclusion, On face value I think the stock offers a good potential opportunity to earn a dividend income with a potential move to the upside of 20% – 50%.  However we are yet to see the full repercussions of ESMA so I will be waiting for the next earnings report before making a decision.

Thank you for taking the time to read this article, I look forward to providing further content in the future.

Sources:

www.ig.com

https://simplywall.st/

This article is not and should not be construed as an offer to sell, or the solicitation of an offer to purchase, or to subscribe for any investment. The author of this article is not a registered financial advisor. Readers should not view this material as offering investment related advice. Authors have taken information from what is perceived as reliable sources, but since the information source(s) are beyond our control, no representation or guarantee is made that it is complete or accurate. The reader precautions to ensure the accuracy of the information provided. Information collected and presented accepts information on the condition that errors or omissions shall not be made the basis for any claim, demand or cause for action. Past results are not necessarily indicative of future results. Any statements non-factual in nature constitute only current opinions, which are subject to change. The information presented in this article is not a specific buy or sell recommendation and is presented solely for informational purposes only. Not be taken as financial advice.

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