Why I like this FTSE 250 bank with a P/E ratio of just 3.2!

This FTSE 250 bank has an exceptionally low price-to-earnings ratio. While this highlights some risk, I’m backing it to continue delivering for my portfolio.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Cheerful young businesspeople with laptop working in office

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Shareholders in this FTSE 250 bank have endured a tough year. The Bank of Georgia (LSE:BGEO) share price has fallen considerably since Russia’s invasion of Ukraine in February. But the falling share price belies some very positive performance data. So, here’s why I’m backing this FTSE 250 bank, with a very attractive price-to-earnings (P/E) ratio, for my portfolio.

Valuation

The P/E ratio is a metric for valuing a firm based on its stock price and the earnings per share over the trialing 12 months or last reporting year. Based on the current share price and financials for the year ending December 31 2021, the Bank of Georgia has a P/E ratio of just 3.18. That’s very low, particularly for a financial services company. In fact, it’s so low that it feels to me like something must be wrong.

The P/E figure reflects the bank’s earnings per share of 364p for 2021 and the current share price of 1,160p. More broadly, we can see that the Bank of Georgia has a current valuation of £544m while delivering £192m in pre-tax profit last year.

Should you invest £1,000 in Bank of Georgia right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Bank of Georgia made the list?

See the 6 stocks

Created with Highcharts 11.4.3Bank Of Georgia Group Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

Why did the share price fall?

The share price fell following Russia’s invasion of Ukraine and the subsequent introduction of Western sanctions against Moscow. Despite a troubled relationship with its northern neighbour Russia, along with Ukraine, they’re two of Georgia’s largest trading partners. As a result, Georgian economic growth forecasts were slashed to 2.5%.

But for me, the economic fallout from the war has been too heavily factored into the share price. I see Georgia as a high-growth market in the long run. It’s one of the most democratic and forward-looking nations in the former Soviet space and has one of the best ease of business rankings in the world. In fact, for a long time, it was ranked number one.

Finances

Its performance was good in 2021, buoyed by strong economic data. In March, Georgia’s Office for National Statistics said the economy had grown 14.6% year-on-year. The Bank of Georgia in turn posted that pre-tax profit of £192m, more than any year in the last five. Despite poor performance during the pandemic, it still delivered profits and I believe it has a strong future ahead of it as Georgia’s number two bank and an international operator.

An alternative

Georgia’s largest financial organisation, TBC Bank, is also in the FTSE 250. In fact, it represents a similar opportunity to the Bank of Georgia. It has a trailing-12-month P/E ratio of 3.2 and experienced a bumper year in 2021. Pre-tax profit for the 12 months to December 31 rose to £226m, massively up from 2020. 

TBC Bank has also expanded its operations outside Georgia. The company recently noted that the Georgian banking business will remain its core strategy, but highlighted the upside of its Uzbek business.

Created with Highcharts 11.4.3TBC Bank PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

Risks

There could be some short-term pain for these two banks as we’re yet to see how the Georgian economy will fare due to the war. How it will impact trade and tourism is uncertain, although it hasn’t put off Russians. Direct flights from London to Tbilisi haven’t restarted — they haven’t operated since spring 2020. Equally, the war may deter big spending visitors from the Middle East.

Despite these risks, I’m a shareholder in both banks and looking to buy more.

But what does the head of The Motley Fool’s investing team think?

Should you invest £1,000 in Bank of Georgia right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Bank of Georgia made the list?

See the 6 stocks

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

James Fox owns shares in the Bank of Georgia and TBC Bank. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

What £20,000 invested in BT shares at the start of 2024 is worth now…

BT shares enjoyed a solid 2024, Harvey Jones discovers, especially once the bumper dividend is taken into account. So should…

Read more »

Investing Articles

The Lloyds share price could hit 80p in 2025!

The Lloyds share price could push as high as 80p in 2025, according to one highly respected analyst. Dr James…

Read more »

many happy international football fans watching tv
Investing Articles

This FTSE 250 stock offers no passive income but looks 42% undervalued to me!

Our writer has found one stock that he thinks could take off in 2025, even though it doesn’t offer the…

Read more »

Investing Articles

Can £5 a day in an ISA build a passive income stream?

With a Stocks and Shares ISA, an investor may be able to make a healthy passive income for years to…

Read more »

Investing Articles

How much would I need in an ISA to earn a £500 monthly passive income?

This writer explores the passive income potential of an ISA and highlights a unique FTSE 100 trust that he thinks…

Read more »

Investing Articles

If a 40-year-old put £500 a month in a SIPP, here’s what they could have by retirement

Worried about not having enough money to retire on? Regular investment in a Self-Invested Personal Pension (SIPP) could be worth…

Read more »

Investing Articles

How much would a Stocks & Shares ISA investor need for a £3,000 monthly passive income?

Looking to make a four-figure second income with a Stocks and Shares ISA? Royston Wild explains how investors might hit…

Read more »

Investing Articles

Can this FTSE 250 underperformer turn things around in 2025?

After underperforming since its IPO, shares in Dr Martens have finally started to show some life. Is 2025 the year…

Read more »