24th Oct 2024. 8.59am
Regency View:
BUY GB Group (GBG)
Regency View:
BUY GB Group (GBG)
Securing the future: Why GB Group is the cybersecurity player to watch
In today’s hyper-connected world, our digital identities are the keys to everything, from accessing bank accounts to booking holidays. But as convenient as the digital age is, it also comes with a heightened risk of identity theft and cybercrime. This is where GB Group (GBG) steps in, offering a crucial line of defence for businesses and consumers alike.
Safeguarding digital identities worldwide
GB Group’s mission is simple but powerful: to protect and secure digital identities across the globe. Whether it’s helping businesses verify customer identities, ensuring regulatory compliance, or safeguarding against fraud, GBG stands at the forefront of the cybersecurity and fraud prevention market.
At the heart of their offering are three pillars:
- Identity Verification: GBG’s advanced identity solutions allow businesses to onboard customers securely and quickly. By utilising AI-powered verification techniques, such as biometric checks and cross-referencing global data, GBG helps companies build trust with customers—without friction or delay. The integration of AI has elevated GBG’s ability to process data faster and more accurately at scale.
- Location Intelligence: When it comes to global business operations, getting location data right is crucial. GBG’s Loqate product ensures precise address verification, streamlining logistics, e-commerce, and customer services. Powered by AI-driven algorithms, Loqate handles millions of address verifications daily, reducing costly errors for companies and enhancing user experience.
- Fraud Prevention & Compliance: Cybercriminals are becoming more sophisticated, but so is GBG’s defence. Their AI-enhanced fraud detection systems monitor transactions in real-time, identifying suspicious activities before they can cause harm. GBG also helps companies stay ahead of regulatory changes, providing peace of mind that their operations are compliant and secure.
Operating on a subscription-based model, GBG provides flexible solutions across industries—from finance to retail and telecoms. As businesses increasingly turn to digital-first strategies, GBG’s products are pivotal in keeping digital platforms secure and operational.
GBG reclaims its identity: A segment on the rise
In its latest trading update, GBG reported a strong recovery in its Identity segment, which has long been the company’s growth engine. For the first half of FY25, this segment delivered 6.8% growth on a constant currency basis, outpacing expectations, particularly in key regions like EMEA and the Americas. This rebound is underpinned by improvements in net revenue retention and the successful ramp-up of existing customer relationships.
GBG’s Identity segment plays a critical role across sectors such as finance, e-commerce, and telecommunications, where robust identity checks are non-negotiable. This recovery has been fuelled by the company’s operational efficiencies and customer wins, highlighting its market leadership despite the challenging tech landscape.
What’s more notable is how GBG has been able to grow its Identity segment while the broader tech sector faces subdued demand. With streamlined operations and improved cost management, the segment has strengthened its position, further boosting the company’s confidence in achieving its mid-single-digit revenue growth target for FY25. This turnaround signals that GBG’s core business is poised for long-term, sustainable growth.
Technical analysis: A turnaround underway
GBG’s share price has shown promising signs of a turnaround after a prolonged downtrend between 2021 and 2023. A notable gap higher in April of this year hinted at a shift in momentum, followed by another gap high following last week’s optimistic trading update. These price gaps represent the emergence of two key catalysts for a potential trend reversal.
As the stock stabilises and begins to push higher, there’s increasing evidence that investors are regaining confidence in the company’s outlook. The recent gaps serve as signals of renewed momentum, positioning GBG for further gains as the technical recovery gains traction.
Valuation and high-quality financials
GB Group’s current valuation reinforces its appeal as a compelling growth stock. The shares trade at a forward P/E multiple of 17, which reflects the company’s strong market position. However, this premium is balanced by projected double-digit earnings growth, giving GBG an attractive price-to-earnings growth (PEG) ratio of just 0.5. Even more striking, the shares are currently priced 33.5% below their estimated fair value, suggesting there’s considerable upside potential.
GBG’s financial strength shines through in its ability to generate robust free cash flow and its impressive operating metrics. The company boasts a return on equity of 103% and an operating margin of 8.19%, underscoring its capability to create value despite fierce competition and the evolving cybersecurity landscape.
In our view, GBG is well-positioned to capitalise on the growing demand for identity verification, fraud prevention, and compliance solutions. With technical indicators signalling a shift in momentum, we see this as a prime opportunity to snap up this high-quality stock before its valuation climbs further.
Disclaimer:
All content is provided for general information only and should not be construed as any form of advice or personal recommendation. The provision of this content is not regulated by the Financial Conduct Authority.