Should You Invest In The Financial Stock Ecofin Global Utilities and Infrastructure Trust plc (LON:EGL)?

Ecofin Global Utilities and Infrastructure Trust plc (LSE:EGL), a GBP£118.29M small-cap, is a capital market firm operating in an industry, which now face the choice of either being disintermediated or proactively disrupting their own business models to thrive in the future. Many aspects of banking and capital markets are being attacked by new competitors, whose key advantage is a leaner and technology-enabled operating model, allowing them to scale at a faster rate and meet changing consumer needs. Financial services analysts are forecasting for the entire industry, negative growth in the upcoming year , and an overall negative growth rate in the next couple of years. Unsuprisingly, this is below the growth rate of the UK stock market as a whole. Is now the right time to pick up some shares in capital markets companies? In this article, I’ll take you through the sector growth expectations, and also determine whether Ecofin Global Utilities and Infrastructure Trust is a laggard or leader relative to its financial sector peers. See our latest analysis for Ecofin Global Utilities and Infrastructure Trust

What’s the catalyst for Ecofin Global Utilities and Infrastructure Trust's sector growth?

The threat of disintermediation in the capital markets industry is both real and imminent, taking profits away from traditional incumbent financial institutions. In the previous year, the industry saw growth in the twenties, beating the UK market growth of 11.51%. Given the lack of analyst consensus in Ecofin Global Utilities and Infrastructure Trust’s outlook, we could potentially assume the stock’s growth rate broadly follows its capital markets industry peers. This means it is an attractive growth stock relative to the wider UK stock market.

Is Ecofin Global Utilities and Infrastructure Trust and the sector relatively cheap?

The capital markets sector's PE is currently hovering around 17x, relatively similar to the rest of the UK stock market PE of 18x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. Furthermore, the industry returned a similar 13.53% on equities compared to the market’s 12.75%. On the stock-level, Ecofin Global Utilities and Infrastructure Trust is trading at a lower PE ratio of 11x, making it cheaper than the average capital markets stock.

What this means for you:

Are you a shareholder? Capital markets stocks are currently expected to grow slower than the average stock on the index. This means if you’re overweight in this sector, your portfolio will be tilted towards lower-growth. If growth was one of your main investment catalyst in the sector, now would be the time to revisit your holdings in Ecofin Global Utilities and Infrastructure Trust. Keep in mind the sector is trading relatively in-line with the rest of the market, which may mean you’ll be selling out at a reasonable price.

Are you a potential investor? The financial sector’s below-market growth and average valuation hardly makes it an exciting investment case. If you’re looking for a high-growth stock with potential mispricing, it seems like capital markets companies like Ecofin Global Utilities and Infrastructure Trust isn’t the right place to look. However, if you’re interested in the stock for other reasons, I suggest you research more into the company’s cash flow as well as its financial health in order to gain a holistic view of the stock.

For a deeper dive into Ecofin Global Utilities and Infrastructure Trust's stock, take a look at the company's latest free analysis report to find out more on its financial health and other fundamentals. Interested in other financial stocks instead? Use our free playform to see my list of over 600 other financial companies trading on the market.

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.