Leveraged products provider Plus500 has been the subject of a few controversies over the years. Headquartered in Israel, the FTSE 250 company reported accounting errors in 2019, which saw the shares lose over 50% of their value in a matter of days. The issue was a $103 million accounting error from its 2017 accounts when it stated that it had suffered no losses from client trading.
The company has also faced regulatory challenges, but has been focused on rebuilding its reputation, delivering on its core principles and making some management changes along the way. Despite a troubled past, since the company’s IPO in 2013 total shareholder returns have reached over 2000%, making it one of the greatest success stories of the last decade.
Source: Plus500 H1 Interim Results 2021
When it comes to financial performance, few companies are able to generate anywhere near the returns of CFD (Contracts For Difference) providers like Plus500. Over the past 5 years, Operating Margins, Returns on Capital Employed and Returns on Equity have consistently been in excess of 50%. Plus500 also remains one of the cheapest companies listed on the London markets by Price to Free Cashflow (4.8).
The operational flexibility and scalable business model of the company is now enabling it to expand and diversify. The substantial cash generation accumulated in recent years is being deployed to pursue additional growth opportunities, increase dividend payments and carry out share buybacks.
Profile
What are the company's principal business activities, how does it generate its revenues?
Plus500 is an online trading platform that allows individual customers to buy and sell contracts for difference (CFDs). CFDs essentially allow individuals to speculate on the future direction of an asset, without actually owning the underlying asset. Plus500 makes its money from the difference between the buy and sell price (the spread) and overnight holding costs and other various charges.
Due to the leverage factor, CFDs are hugely popular products for those who wish to capitalise on short-term price movements in the markets. Plus500 allows its customers to trade CFDs in over 50 countries and on over 2,200 different underlying global financial instruments, including: equities, indices, commodities, options ETFs, crypto currencies and foreign exchange.
Revenues soared in 2020, reaching an all time high of…
