Back in March, IG Group (LSE: IGG) entered the exclusive FTSE 100 index. After spending around 20 years in the FTSE 250, the investment and trading platform operator finally achieved a market cap large enough to warrant inclusion in the large-cap index.
Is the stock worth considering for a Stocks and Shares ISA or SIPP today? Let’s take a look at the set-up.
An effective business model
There’s a lot to like about IG’s business model, in my view. For a start, it’s able to profit both when markets are rising and when they’re falling.
When markets are on the rise, investors and traders tend to be more active in an effort to capitalise. However, when they’re falling, trading activity can also be high as people take profits, rebalance their portfolios, hedge positions, and buy dips.
Second, the company is well positioned to benefit from long-term retirement investing in the UK. Not only does it offer Stocks and Shares ISAs and SIPPs on its main platform, but it owns investment platform Freetrade that also offers Stocks and Shares ISAs and SIPPs.
Momentum in 2026
As a result of this business model, the company has quite a bit of momentum at the moment. In May, for example, it raised its annual and medium-term revenue forecasts for the second time this year, after market volatility boosted Q1 organic revenue.
Looking ahead, it now expects organic revenue growth of 10%–15% for 2026. Meanwhile, in the medium term, it’s targeting organic revenue growth of 10%.
A high level of profitability
This isn’t just a growth story though – IG is also very profitable. This is a company with high gross profit and operating profit margins.
It also has a high return on capital employed (ROCE). Note that businesses with high ROCEs can often get much bigger over time as they compound their returns.
Dividend income on offer
Additionally, we have rising dividends and share buybacks. At present, the yield here is about 2.6% so there’s a little bit of passive income on offer.
As for the valuation, it looks quite reasonable to me. Assuming the company was able to generate earnings growth of 10% this year, we’re looking at a price-to-earnings (P/E) ratio of around 15.
That’s a tad above the market average. However, I think it’s justified given the business model, growth, and high level of profitability.
Worth a look?
Of course, there are risks. Competition from other players like Robinhood (I hold some shares here) is one.
A lengthy downturn in the equity markets is another. This could result in less interest in investing.
Overall though, I like the risk/reward set-up. To my mind, the stock is worthy of further research.
It’s worth noting that analysts at Barclays just raised their price target to 2,010p. So, they expect it to keep rising.
Should you invest £5,000 in IG Group Holdings right now?
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Edward Sheldon owns shares in Robinhood Markets
