Plus500 profits from market panic

Plus500 (PLUS) loves volatile markets; the scarier the better. It's these big swings in sentiment that get traders excited and dealing more regularly. The more business that goes through the company's online trading platform for CFDs, the bigger its profit. Revenue almost tripled during the third quarter, and a typically volatile October is the perfect start to the final three months of 2014.

In the quarter to 30 September, revenue surged to $56.2 million (£39.4 million) from just $20 million a year ago, meaning nine-month revenue is up 151% at $162.4 million. "July and August, typically slower months, were surprisingly strong," chief executive Gal Haber told Interactive Investor.

Admittedly, the company spent far more than anticipated on advertising over the summer - an estimated $15 million, according to broker Numis Securities. But the war in Ukraine and Alibaba IPO generated plenty of interest and the VIX volatility index was up sharply.

To keep growing, Plus500 needs new customers and must squeeze more from each one, increasing average revenue per user (ARPU). It did both, up 17% and 138% respectively for the quarter.

"We're very happy with the results very good numbers and indicative of what's to come," said Haber.

The fourth quarter is historically a very profitable one for Plus500. The company pays a fat dividend, too, in line with its policy to pay no less than 50% of retained profits in each financial year out as dividends.

At 515p, Plus500 shares trade on a forward price/earnings (P/E) multiple of just 9, dropping to 8.2 in 2015. That's very modest given Numis expects a 2013-2016 earnings per share (EPS) compound annual growth rate (CAGR) of 34%. There's a prospective dividend yield of almost 7%, too, rising to nearer 8% for 2015. That's certainly attractive and offsets some of the share price volatility. There's also technical support now at 500p and further back at 435p.

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