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Trust the Numis black box

Despite poor earnings visibility, the mid-tier investment bank has proved a sound long-term bet
Trust the Numis black box

Usually, this magazine extols the virtues of companies that make reliable cash flows from in-demand products sold to well-defined markets and run by executives that can manage clearly-forecasted costs. This week, forgive us for putting that hymn sheet aside, while we outline the buy case for an investment bank

Tip style
Growth
Risk rating
High
Timescale
Long Term
Bull points
  • Excellent long-term returns
  • Strong demand for dealmaking
  • Overseas expansion
Bear points
  • Earnings opacity
  • Tough figures to beat

One glance at the past half-decade of income statements for Numis Corporation (NUM) tells the story. While revenues gradually climbed in the four years to 2018, alongside a steady expansion in client numbers, advisory fees and trading activity cratered in the 12 months to September 2019. The reason? In the words of the bank’s co-chief executives Alex Ham and Ross Mitchinson, “persistent political uncertainty, macro-economic factors and subdued, yet volatile markets”.

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