Timing the stock market perfectly is essentially an impossible task. Furthermore, it seldom surpasses the reliable approach of patiently and consistently investing in all market conditions.
World-famous investor Warren Buffett makes no attempt to forecast the market, but rather focuses his efforts on finding undervalued securities. In so doing, the Oracle of Omaha has consistently benefitted from significant returns.
With this in mind, I’ve got my eye on an undervalued stock that I think could rank among the best and most underrated out there today.
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If I had some spare cash lying around, I’d buy some shares for my portfolio today and hold them for the long term.
A company offering unique international exposure
Bank of Georgia (LSE:BGEO) is a UK-based, Georgia-focused banking business. The group comprises retail banking and payment services, corporate and investment banking, and wealth management operations.
JSC Bank of Georgia is the core entity of the company. It offers a wide range of banking products and services to its retail and corporate customers.
The company is an important bank in Georgia. It serves over 2.6m customers through one of the largest services distribution networks.
As such, Bank of Georgia shares represent an exciting opportunity for me to diversify my exposure away from the UK and increase my exposure to a fast-growing economy located outside of Western Europe.
According to the National Statistical Service in Tbilisi, Georgia’s real GDP increased by 10.1% in 2022 over the previous year.
A robust financial performance
Alongside operating in a rapidly developing economy, the bank’s recent financial performance has been impressive.
Last month, bosses reported a significant increase in first-quarter operating income. Alongside this, robust bottom-line growth and strong asset quality were highlighted.
Overall operating income rose 42.4% to 563.5m Georgian lari, with the growth driven by strong performance across core revenue lines. In addition, net interest income increased 37% and net fee and commission income surged 90.9%.
However, it wasn’t all smooth sailing. Analysts pointed out that profit before income tax expense remained flat quarter on quarter, but that income tax expense nearly doubled on the quarter due to tax rate changes announced back in December.
As a result, the bank’s profit for the first quarter actually decreased compared to the prior quarter.
Ongoing risks and uncertainties
While Georgia is an exciting emerging economy, its location unfortunately means there will always be an increased risk of regional tensions and economic instability impacting its business environment.
Given the current Russia-Ukraine war, this particular risk has intensified, and Bank of Georgia is not immune to its impact.
Despite this, I’m confident that as Georgia’s role in the South Caucasus region continues to strengthen, the group will be well-positioned to deliver on its aim to achieve 20%+ return on average equity and around 10% growth of the loan book in the medium term.
Now if only I had some cash to spare!
