The Just Group share price surges 13% today! Here’s what I think is coming next

At present (8 March) marks a robust finish to the week for the Simply Group (LSE:JUST) share value. The inventory is at its highest stage because the summer time of 2021, fuelled by the discharge of sturdy outcomes. But given the outlook going ahead, I’m undecided that that is only a flash within the pan. Right here’s why.

Beneficial properties throughout the board

Let’s have a fast run by way of the outcomes. The monetary retirement product and repair supplier noticed a spike in each gross sales and working revenue, largely due to the rise in rates of interest.

Retirement earnings gross sales hit £3.9bn, up 24% versus the prior yr. Working revenue jumped 47% to £377m versus the 2022 results of £257m. It bumped up the dividend per share fee by 20% to 2.08p per share.

The rise in rates of interest right here within the UK meant that Simply Group felt a very optimistic impact from the Outlined Profit and retail Assured Earnings for Life markets.

It additionally benefitted from the retirement market being extra lively basically. The report said that “the variety of advisers searching for quotes from Simply has elevated by 50%”. With extra unbiased advisors eager to at the very least speak to Simply Group for potential enterprise quotes, it exhibits the quantity of demand in that sector.

This won’t be over

One cause why I believe the share value is admittedly climbing is that the outlook for the agency additionally appears very sturdy.

The CEO commented that “we now count on to realize our goal of doubling income in three years as a substitute of the initially meant 5”. This was not simply because of the nice 2023, however fairly attributable to “the a number of alternatives accessible and robust structural development drivers in our chosen markets”.

Traders subsequently must readjust their expectations for the longer term share value actions attributable to the truth that earnings are more likely to be increased than beforehand thought. With a present price-to-earnings (P/E) ratio of 4.55, I nonetheless suppose the share value is affordable.

At a primary stage, if income do double in three years and the share value additionally doubles in three years, the P/E ratio would keep the identical (4.55). So I believe there’s a real chance of long-term share value development right here.

Dangers concerned

A threat I see right here is that if rates of interest fall this yr, it will negatively affect the enterprise. Additional, given the upcoming UK and elections and different market-moving components, volatility ought to enhance. This might affect a number of the pension-related merchandise that maintain investments in shares and bonds.

One other level that’s legitimate is that purchasing the inventory at 52-week highs won’t be probably the most smart transfer. After all, I’d have beloved to have purchased the inventory a yr in the past. But the inventory is simply up a modest 12% over the previous yr, so it’s not like I’ve missed out on enormous beneficial properties.

Pulling all the pieces collectively, I’m severely contemplating shopping for the inventory primarily based on the sturdy outlook from the outcomes right now.