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Baltic Classifieds Group (LSE: BCG) is a lesser-known FTSE 250 growth stock that jumped 7% this week. The rally followed an Overweight rating from Barclays last week and a Buy rating from Bank of America on Monday (14 July).
So what’s all the fuss about?
I decided to dig a little deeper.
A diversified business
As the name suggests, Baltic Classifieds runs a suite of online classified portals across the Baltic states. Its sites list everything from cars and property to jobs and general items in Estonia, Lithuania, and Latvia.
It’s quite a dominant player in these markets, benefiting from network effects that make it tough for new rivals to challenge.
The economic outlook for the region also looks reasonably supportive. Lithuania and Latvia have enjoyed steady wage growth alongside relatively low inflation, helping to sustain consumer demand. Meanwhile, Estonia continues to see healthy international demand for its tech and digital services.
Granted, inflation is expected to remain stubborn in parts of the region this year. Even so, most forecasts point to a broader economic recovery over the next 12 months, which could keep advertising spend flowing – good news for Baltic Classifieds.
A look at the numbers
The group has a market cap of £1.78bn, with shares trading near 370p. It’s up around 125% over the past five years, reflecting its consistent performance.
Financially, the company appears solid. Diluted earnings per share (EPS) rose a strong 38.6% year on year, while annual revenue growth came in at 12%. Its net margin sits at a hefty 54%, which is impressive even by tech standards.
But that quality comes at a price. Baltic Classifieds trades on a forward price-to-earnings (P/E) ratio of 30 and a price-to-book (P/B) ratio of 6. But that’s normal for high-growth stocks, signalling that investors are willing to bet on future earnings.
And not without reason – management is guiding for revenue to climb to around £117m by 2028, from roughly £70m today. Earnings are forecast to hit 17p per share in three years – a near 70% rise from current levels.
But if upcoming earnings fail to impress, the share price could take a sharp dive. Maybe that’s why analysts are taking a cautious approach. The average 12-month price target sits at just 387p, only around 4.4% above the current price.
My verdict
It’s hard to argue with heavyweight brokers like Barclays and Bank of America, who clearly see something attractive here. Baltic Classifieds looks like a stable, well-managed business on a decent growth trajectory.
That said, it pays a negligible dividend, so there’s no immediate income stream. And with the shares already pricing in a fair chunk of that growth, the forecast doesn’t look especially compelling to me.
Given the wide range of potentially more lucrative options elsewhere on the FTSE 250 – many offering both growth and income – Baltic Classifieds wouldn’t be my first pick right now. While it might suit investors seeking exposure to emerging European markets, I’m personally looking for opportunities with stronger catalysts and better value.
