Banking

Broker Firm Comes With Unique Risks But Powerful Growth Story

Among leading growth stocks, our IBD 50 Stock To Watch pick for today is Freedom Holding (FRHC). The firm is a broker and investment banker with a very unique set of risks. Yet it also presents a unique value proposition for investors. Shares are currently nearing a new buy area.




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Growth Stocks To Watch: Freedom Holding

The broker firm is incorporated in Nevada and headquartered in Almaty, Kazakhstan. While the company appears on paper to run like a typical retail securities brokerage in the U.S., it’s actually participating in stock exchanges in Kazakhstan, Moscow, St. Petersburg, Ukraine and other foreign locations. The company holds a 24.3% interest in the Ukrainian Exchange and a 12.8% interest in the St. Petersburg Exchange.

The stock poses extra risk to investors due to it being an international investment organization. Freedom Holding is subject to the regulatory policies of several countries.

Company regulatory filings state that its earnings “are and will be affected by domestic economic conditions and the monetary and fiscal policies of the governments of Kazakhstan, Kyrgyzstan, Russia, Uzbekistan, Ukraine, Azerbaijan, Cyprus and the United States.”

However, the prospects for future growth and the company’s mission make it a worthy contender for interested investors. Freedom Holding makes stocks and stock exchanges more accessible in countries where they once seemed unreachable.

“We remain one of the few floodgates to the Western market for customers from our region,” said founder Timur Turlov in a recent Bloomberg story. Turlov, 33, founded the company in 2008.

Freedom typically moves into new markets and expands its existing markets partly through acquisitions. In 2020, it acquired banks and brokers in the U.S., Kazakhstan and Russia for a total of nearly $63 million. The cash holdings of the companies acquired was reportedly greater than the total acquisition costs.

Analyzing FRHC Stock

Since its IPO in October of 2019, shares have risen over 350%. Year to date, shares are up 26%, outpacing the S&P 500’s performance.

The stock is currently 5% below its nearest buy point, 68.10. The base recently morphed into a double-bottom pattern after shares sold off in early August. The stock dipped below the 50-day moving average and the longer-term 200 day line for a brief period the week of Aug. 16. Since then, the stock has reclaimed these key levels of support.

Freedom holds a strong 94 Relative Strength Rating. That’s a solid score for growth stocks. It means FRHC is outpacing 94% of stocks in IBD’s database. The stock also carries a 90 IBD Composite Rating, which is above the minimum 85 we like to see for growth stocks.

Freedom Holding has posted several quarters showing triple-digit year-over-year growth for both its top and bottom lines.

The company posted sales of $124 million in its recent quarterly report. That was up 120% from a year ago. Ideally, CAN SLIM investors want to see year-over-year growth in the top line of at least 20% to 25% for top growth stocks. The firm showed a profit of 87 cents a share in the most recent quarter, which represents a 107% increase from a year ago.

The company’s mediocre EPS Rating of 66 reflects a few quarters of year-over-year earnings declines from late 2019 and early 2020.

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