The CMC Markets (LSE:CMCX) share price gained 9% in early morning trading on Friday. The jump followed an update from the financial services company. Shares in the trading platform operator had struggled after it published a disappointing update in September.
The London-headquartered firm offers online trading in shares, spread betting, contracts for difference and foreign exchange across world markets.
What’s behind today’s rise?
Stares in CMC Markets rose on Friday after the company said that the recently wrapped up fourth quarter had been its strongest. As a result, the firm said that full-year net operating income would be at the top end of its guidance.
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The London-based firm stated annual net operating income was predicted to be approximately £280m.
“Outside of the pandemic year (financial year ending March 2021), this is a record net operating income result for the company,” chief executive Peter Cruddas said in a statement. He added that the performance data reflected the success of its B2B technology partnerships.
However, the financial services company noted that gross leveraged client income is expected to have fallen from £335m to £288m.
Meanwhile, full-year operating costs were expected to rise, the firm said. Estimates suggested operating costs, excluding variable remuneration, were expected to be approximately £173m, up from £168m a year earlier. The increase was primarily due to higher personnel costs, which were linked to the company’s desire to deliver on its strategic objectives.
CMC Markets will publish results for the financial year ended March 31 on June 9.
Should I buy?
One of the most attractive things about this stock is its 11.7% dividend yield. This is certainly a yield that would help my portfolio overcome inflation, which hit 6.2% in the UK in February.
The stock is now trading at 212p a share, that’s well down from a year high of 545p. The stock had a good run during the pandemic as savings rose and so did interest in investing. But the share price fall came as the pandemic trading boom came to an end.
Despite today’s jump, the stock is trading at considerable discount versus this time last year, but not far off its pre-pandemic levels. CMC now has a price-to-earnings ratio of just under four and that makes it dirt cheap to me.
Moreover, I don’t think the outlook is bad for the company either. According to chief financial officer, Euan Marshall, the company’s platforms have both been running at “close to record levels”. This is certainly encouraging.
One thing to be wary of is the dividend yield. Its coverage ratio for the last two years was above two. But the current 11.7% may be unsustainable.
Nevertheless, I still think this share has considerable upside potential and will be adding it to my portfolio.
