SSP Group - does recent share price weakness present an opportunity?

SSP Group (LON:SSPG) has so far proven to be one of the more successful IPOs of recent years. Its share price has increased by nearly 200% since listing halfway through 2014 and currently trade at 651p.

The group operates food and beverage concessions in travel locations across its UK, Europe, North America and Rest of the World operating divisions. When we analyse SSP from a factor perspective, we find that it has a Quality Rank of 87, a Momentum Rank of 76, but a Value Rank of only 20. This is the classic factor profile of a High Flyer.

A combination of high quality, high momentum and low value is great when earnings go up but a bad place to be when things go wrong. The higher they rise the harder they fall, after all.

What kind of High Flying stock is SSP?

So, High Flyers tend to be riskier and more volatile than the market average. Is this the case with SSP?

One way to find out is by looking at Stockopedia’s RiskRatings system, which splits the stock market into five buckets according to stock price volatility. The five classifications (from least to most volatile) are:

• Conservative (10% of the market)
• Balanced (15% of the market)
• Adventurous (20% of the market)
• Speculative (25% of the market)
• Highly Speculative (30% of the market)

SSP is a balanced stock. This means that the group is actually in the bottom quartile of the market in terms of stock price volatility, despite being a High Flyer. This kind of stock is a possible ‘Low Volatility Anomaly’ candidate, as proposed by fund managers at Robeco: a high quality, stable stock that outperforms over time on a risk-adjusted basis (think tortoise and the hare).

We can see from SSP's above average five-year return on capital employed figure of 13.4% that the group has been highly profitable over multiple years. This suggests that SSP can back up its favourable factor exposures and volatility characteristics with some kind of economic moat.

Find the rockstars of the stock market

High Flyers are great stocks to have in your portfolio if you think you need more momentum or quality - just look out for signs that momentum might be changing. If you want to see which other stocks qualify as High Flyers, you can find a comprehensive list on Stockopedia's StockRanks page.

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