As the Yu Group share price surges, is it a good buy?

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Updated on Aug 14, 2024

Reading time 3 minutes

Yu Group published a strong financial trading statement on Wednesday.
The company hopes that its revenue will be better than its previous guidance.
The shares have formed a small double bottom pattern on the daily chart.

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Yu Group (LON: YU) share price took off on Wednesday after the company published a strong trading statement. The stock popped by more than 26%, making it one of the best performers in London. It has been one of the top stocks in the past few months having risen by over 264% from the lowest point in 2022.

Yu Group ups its forecast

Yu Group is an energy company that provides its products to individuals and companies in the UK. Its business is doing well, as evidenced by the annual results published a few months ago. In a statement, the company said that its revenue in 2022 jumped by 79% to 278 million pounds. Its profit before tax jumped by 72% to over 5.8 million pounds.

Its balance sheet also improved, with its net cash jumping by 177% to over 18.8 million pounds. At the time, the company’s guidance was for its monthly bookings to be over 24.5 million pounds.

Now, the company believes that its business will do better than its estimates, helped by strong demand by households and companies. The trading statement said:

“The run rate growth of average monthly bookings achieved in Q4 2022 has continued into 2023. Pent-up demand from softening commodity markets has seen an increase in customers contracting with Yü providing additional revenue visibility for FY 2023 and beyond.”

Therefore, the stock price performance is a reflection that investors are optimistic about the company. They also believe that the company is reasonably valued considering that it has a market cap of just $96 million.

Turning to the daily chart, we see that the Yu Group stock price formed a double-bottom pattern at 455p. It then popped after the company published a strong trading statement. As it rose, the shares moved to the 50-day and 100-day exponential moving averages (EMA).

The Relative Strength Index (RSI) has drifted upwards and is now approaching the descending trendline shown in green. Therefore, because of the double-bottom pattern, we can’t rule out a situation where the shares jumps to 662p, the highest point on April 12.

On the flip side, a drop below the double bottom at 455p will invalidate the bullish view. It will signal that there are more sellers in the market. Such a move will see it drop to 400p.