Sumo Group (London Stock Exchange: Sumo) It is a video game development and technology outsourcing company headquartered in the UK.this FTSE Index After the acquisition was announced in July, the stock has experienced some positive tailwinds in recent months. Recently, the positive first-half results announced last week also benefited it.Based on all of this, should I add stocks My portfolio?
Growth stocks rise
At the time of writing this article, Sumo Group shares are trading at 485 pence per share. The share price of FTSE stock is currently close to historical highs. At this time last year, I could buy shares at 235 pence per share. At the current level, if I invested at that time, I would see a return of more than 100%.
In July, information Broke that Chinese company Tencent Is taking over the Sumo Group.Tencent is one of the largest video game companies, and one of its biggest creations is a global sensation Fort night. Sumo shares soared. On July 16, the stock traded at 358 pence per share. After the news came out, by July 20, the stock price soared 40% to 503 pence per share.
Outstanding performance and acquisition efficiency
Sumo Released An impressive first half transaction update on September 29. The company said its pre-tax profit for the six months ended June 30 was 3.7 million pounds, compared with 2.8 million pounds in the same period last year. In addition, revenue almost doubled, from £26.3 million in the same period last year to £50.4 million. Compared with the same period last year, net cash has also increased, which will strengthen its balance sheet. I believe this positive performance reflects that FTSE stocks are on an exciting growth trajectory.
Tencent’s 919 million pound acquisition is a major positive for me. Tencent has a history of acquiring Western entertainment and cultural businesses. It already has influential shares in the fields of music, film, television and video games. So far, in 2021 alone, it has invested in 60 different game companies. It is capitalizing on the gaming craze associated with the pandemic. According to the results recently announced by Sumo, the acquisition should be completed in the fourth quarter. I believe this acquisition will only benefit sumo. It will also expand its reach and enhance its products.
FTSE stocks also have risks
In my opinion, sumo wrestling seems destined for bigger and better things. Nevertheless, I must also be alert to the risks involved. First of all, from any imagination, Tencent’s acquisition of Sumo is not a cheap thing. Before the news of the acquisition, the price-to-earnings ratio of the stock price was 40 times. At a price of 513 pence per share, this has risen to a price-to-earnings ratio of close to 60 times. This means two things to me. First, the current stock price reflects the price paid by Tencent, meaning that further growth and positive performance have been priced. Second, if there is any negative news, Sumo’s share price may fall sharply.
Overall, I believe that Sumo may be an excellent FTSE stock in my portfolio. I believe this acquisition will only benefit it, and it may experience some exciting moments. As a potential investor, this can bring me great returns. At the current level, I will buy stocks for my portfolio.
Jabran Khan has no position in any of the shares mentioned. The views expressed by the companies mentioned in this article are those of the author and may therefore differ from the official recommendations we made in subscription services such as Share Advisor, Hidden Winners and Pro. At The Motley Fool, we believe that taking into account a variety of different insights, We are better investors.