Virgin Money Holdings UK PLC – Value Analysis (LONDON:VM) : December 26, 2017

Capitalcube gives Virgin Money Holdings UK PLC a score of 61.

Our analysis is based on comparing Virgin Money Holdings UK PLC with the following peers – Aldermore Group Plc, Bank of Ireland Group Plc and Nordea Bank AB (ALD-GB, BIRG-GB and 0JNL-GB).

Fundamental Overview

Virgin Money Holdings UK PLC has a fundamental score of 61 and has a relative valuation of UNDERVALUED.

Fundamental Score

Company Overview

  • It’s current Price/Book of 0.92 is about median in its peer group.
  • The market expects VM-GB to grow more slowly than its peers and for its median ROE to decline.
  • VM-GB‘s relative capital efficiency and net profit margins are both around the median level.
  • The company’s year-on-year change in revenues and earnings are better than the median among its peer group.
  • Over the last five years, VM-GB‘s return on equity has declined from above median to around median among its peers, indicating declining relative operating performance.
  • While VM-GB‘s revenue growth in recent years has been above the peer median, the stock’s P/E ratio is less than the peer median suggesting that the company’s earnings may be peaking and the market expects a decline in its growth expectations.
  • The company’s equity capital investment program and to-date returns suggest that the company is likely making big bets on the future.
  • VM-GB might have enough interest coverage to take-on additional debt prudently.

Drivers of Margin

  • VM-GB‘s lending operations show some differentiation with pricing advantages.
  • The company’s comparatively high proportion of net interest income (net interest income/total revenues) of 88.86% versus peer median of 68.27% suggests that VM-GB‘s lending operations show some differentiation with pricing advantages. However, VM-GB‘s pre-tax margin of 35.93% is around the peer median suggesting higher operating costs relative to peers.
  • The company’s comparatively low proportion of fee based income (i.e. non interest income/total revenues) of 11.14% versus peer median of 31.73% — suggests that VM-GB‘s operating margins are likely to be more volatile. In addition, VM-GB‘s proportion of overhead costs (i.e. non interest expense/total revenues) of 56.52x is around peer median — suggesting no cost advantage on fee-based overhead operations.
Drivers of Margins

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Differentiated; High Cost, Commodity; High Cost, Commodity; Low Cost

Company Profile

Virgin Money Holdings UK PLC operates as a holding company with interests in providing financial services. It engages in the provision of banking services, unit trusts and pensions, marketing and direct distribution of personal credit cards and general and life insurance services through its subsidiaries. The company was founded on August 4, 1995 and is headquartered in Newcastle upon Tyne, the United Kingdom.