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It’s fair to say that the usually-pedestrian FTSE 100 has performed brilliantly over the last 12 months. A gain of 18% or so easily outperforms the tech-driven S&P 500.
Despite this, not every company that features in the index is having such a great time.
Heavy faller
Shares in London Stock Exchange Group (LSE: LSEG) have been in appalling form lately. Anyone investing £10,000 at the end of January 2025 will have seen their stake in the financial data, analytics, and risk management solutions provider shrink in value to about £6,800.
Sure, holders will have received dividends during this period, but this would have barely made a dent. As befitting a growth stock, the £41bn giant yields under 2%. And that’s after the substantial fall (the yield rises as the share price falls, all other things being equal).
All this seems a bit strange considering that the business seems to be trading well. Third-quarter numbers released last October were better than expected, pushing the stock up over 7% on the day.
What gives?
Well, at least some of the fall appears to be down to concerns that nimbler rivals are out to steal some of the group’s lunch by bringing more cost-effective solutions to market.
So, is now the time for brave contrarians to consider buying?
Once-in-a-blue-moon opportunity?
On a positive note, the stock is certainly a lot cheaper than it once was. As things stand, we’re looking at a price-to-earnings (P/E) ratio of 18 for 2026. The average P/E for this company over the last five years has been over 40! On paper at least, this would suggest that there’s a sufficient margin of safety for new investors to get involved.
There are other attractions beyond price (as there needs to be). Despite it’s shocking performance of late, this is still a company with a significant global footprint. Its 10-year partnership with a titan like Microsoft also bodes well for product development.
Even so, one can’t ignore the fact that operating margins, while still above-average relative to the wider market, are nothing like where they were a few years ago. The threat of cyberattack is particularly high for a business in this space, too.
Elsewhere, the number of flotations on the London market remains sluggish and there are concerns is that even more UK companies will move their listings across the pond. Efforts are being made to make the London market more attractive but whether these will prove sufficient remains to be seen.
Staying patient
Buying a stock when everyone else seems to be selling has the potential to be very lucrative. However, there is no guarantee that London Stock Exchange Group — or any other heavy faller for that matter — will recapture its previous form. Even if it does, a full recovery may take some time. And that’s without considering what may happen if there’s a meltdown in stock markets as a whole.
So, while I do think that the shares are an interesting proposition at this price, I don’t see this is a slam-dunk value buy just yet. Full-year numbers — due at the end of February — should provide more visibility on the near-term outlook.
