The abrdn share price has soared in 6 months. Is there still time to buy?

At abrdn (LSE: ABDN) This share price has risen by more than 50% in the past six months. But something makes me think that the stock is still cheap.

It’s a big increase. But abrdn shares are down 50% in five years. I would say that we are still in the dip. But we have to see what is behind it.

Merger

This company was formed from the merger of Standard Life and Aberdeen Asset Management in 2017. I like both companies at the time.

So when two good companies join forces, the result is better, right? Not in this case, not the first time. They just don’t seem to gel, and some good investors withdraw funds.

Then Lloyds Banking Group moved a bunch of retirement assets away. That helped end 2022 with a loss.

Dividends

But as a sign of hope for the future, the dividend is still being paid. In fact, the board plans to keep the dividend at 14.6p per year until earnings are strong enough to grow.

Currently, that yields 7%. The same thought every year until it can rise again, always tempts me.

However, there are obvious risks. You know, the best laid plains of mice and people and all that. Just because the bosses want enough income to pay a bigger dividend, doesn’t mean it’s going to happen.

Still, it seems City analysts are happy. He thinks that profits will come back and remain stable for the next two or three years.

growth?

However, we have not seen one important thing. The abrdn board is looking for earnings to cover 1.5 times the dividend before growth resumes.

But this is not yet in the forecast. We’re looking for the best break-even cover for the next year or two.

But these are tough times for people in the asset business. Inflation, high interest rates, weak stock markets… all make it difficult for companies like abrdn.

So to look at the value today and think of it as long-term would be a mistake, I think. And that valuation provides a price-to-earnings (P/E) ratio of around 16 to 19 on abrdn stock over the next few years.

Cheap

If that’s how the market is priced in a low business cycle, then I think the market is wrong. That’s not a no-brainer-buy P/E ratio. But I look cheap.

What swings are for me is dividends. For now, let’s hope the plan to move forward doesn’t tempt fate. There must be a real possibility that it won’t go away.

And if the Board should withdraw from it at any time in the next two or three years, I think the stock price of abrdn can tank.

But on balance, that 7% per year puts abrdn on the potential buy list for me.