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At the moment (8 March) marks a robust finish to the week for the Simply Group (LSE:JUST) share value. The inventory is at its highest degree for the reason that summer time of 2021, fuelled by the discharge of robust outcomes. But given the outlook going ahead, I’m unsure that that is only a flash within the pan. Right here’s why.
Beneficial properties throughout the board
Let’s have a fast run by means of the outcomes. The monetary retirement product and repair supplier noticed a spike in each gross sales and working revenue, largely because of the rise in rates of interest.
Retirement revenue gross sales hit £3.9bn, up 24% versus the prior yr. Working revenue jumped 47% to £377m versus the 2022 results of £257m. It bumped up the dividend per share cost by 20% to 2.08p per share.
The rise in rates of interest right here within the UK meant that Simply Group felt a extremely optimistic impact from the Outlined Profit and retail Assured Earnings for Life markets.
It additionally benefitted from the retirement market being extra lively usually. The report acknowledged that “the variety of advisers on the lookout for quotes from Simply has elevated by 50%”. With extra unbiased advisors eager to a minimum of speak to Simply Group for potential enterprise quotes, it reveals the quantity of demand in that sector.
This may not be over
One purpose why I feel the share value is basically climbing is that the outlook for the agency additionally appears to be like very robust.
The CEO commented that “we now anticipate to realize our goal of doubling earnings in three years as an alternative of the initially meant 5”. This was not simply because of the nice 2023, however slightly on account of “the a number of alternatives obtainable and powerful structural progress drivers in our chosen markets”.
Traders subsequently have to readjust their expectations for the longer term share value actions on account of the truth that earnings are more likely to be greater than beforehand thought. With a present price-to-earnings (P/E) ratio of 4.55, I nonetheless assume the share value is reasonable.
At a fundamental degree, if earnings do double in three years and the share value additionally doubles in three years, the P/E ratio would keep the identical (4.55). So I feel there’s a real risk of long-term share value progress right here.
Dangers concerned
A threat I see right here is that if rates of interest fall this yr, it might negatively influence the enterprise. Additional, given the upcoming UK and elections and different market-moving components, volatility ought to enhance. This might influence among the pension-related merchandise that maintain investments in shares and bonds.
One other level that’s legitimate is that purchasing the inventory at 52-week highs may not be probably the most smart transfer. After all, I might have beloved to have purchased the inventory a yr in the past. But the inventory is barely up a modest 12% over the previous yr, so it’s not like I’ve missed out on large beneficial properties.
Pulling all the things collectively, I’m severely contemplating shopping for the inventory primarily based on the robust outlook from the outcomes at present.
