Will IG Group Holdings plc beat Standard Chartered PLC and Legal & General Group Plc after update?

Does IG Group Holdings plc (LON:IGG) (IGG.L) have more investment potential than Standard Chartered PLC (LON:STAN) (STAN.L) and Legal & General Group Plc (LON:LGEN) (LGEN.L)?

IG Group Holdings plc
IG Group Holdings plc

The IG Group Holdings plc (LON:IGG) (IGG.L) share price has surged 5% higher today after it released a third quarter revenue update.

The quarter saw record revenue from the company, with net trading revenue moving 30% higher versus the same period from the previous year. It was 13% higher than the previous record revenue achieved in the first quarter of the 2018 financial year.

Higher client trading activity was a key driver behind revenue growth. An increase in the number of active clients also boosted performance. OTC leveraged revenue per client of £1,482 was 25% higher than in the prior year.

Cryptocurrency trading remains popular, with it accounting for 11% of revenue during the period. However, since the decline of Bitcoin started a few months ago, it has become markedly less popular. I wouldn’t be surprised if this trend continues over the medium term, since the buzz surrounding the virtual currency seems to have levelled off.

IG Group continues to face regulatory risks in my view. Although its revenue growth has been strong across all regions and products, ESMA is due to publish measures to restrict the marketing, distribution and sale of CFDs to retail clients. This may impact negatively on the business in future years in my view, and could hurt investor sentiment.

In the last year the IG Group share price has risen 61%. That’s a better performance than other financial services sector stocks such as Standard Chartered PLC (LON:STAN) (STAN.L) and Legal & General Group Plc (LON:LGEN) (LGEN.L). Standard Chartered is up 2% and the Legal & General share price has gained 4%.

In my view, IG Group could move higher in the short run due to its strong current performance. However, I remain cautious about the wider CFD/spread betting industry. Regulatory change could impact on the performance of the sector. Because of this, I’m not looking to add the stock to my portfolio at the moment.

About Robert Stephens 3891 Articles
Robert Stephens is a CFA Charterholder and an Equity Analyst by trade. He is a passionate private investor who has been buying and selling shares for many years, owning a wide range of UK shares in the process. He has written for Citywire and The Motley Fool US and now runs his own business. To contact Robert, please email [email protected] or use one of the other contact methods available on the 'Contact Us' page