The pound has fallen sharply towards the US greenback in current weeks. Many FTSE 250 shares have been beneath stress as buyers fear about geopolitics, potential commerce tariffs, and home progress.

The US greenback has continued to rise as buyers guess that the US Federal Reserve will preserve rates of interest increased for longer. This, coupled with issues over home financial progress within the UK, means we’re seeing sterling beneath stress.

Nevertheless, when the pound weakens, UK corporations with vital offshore earnings can do effectively. Trainline (LSE: TRN) is without doubt one of the FTSE 250 shares that I believe might be a beneficiary.

What does Trainline do?

Trainline is a number one on-line platform for practice and coach ticketing companies throughout Europe. Whereas it has a robust presence within the UK, Europe represents a key progress market given the sheer variety of journeys taken on the mainland.

In its half-year outcomes to 31 August, Tranline reported an 18% improve in first half transactions to over 110m. This helped increase Trainline’s internet ticket gross sales by 14% 12 months on 12 months to £3bn. Adjusted earnings earlier than curiosity, tax, depreciation, and amortisation (EBITDA) grew by 44% to £82m. A rising share of the corporate’s income now comes from worldwide markets, decreasing its reliance on the UK economic system.

Valuation

The corporate’s share price has been unstable over the previous 12 months, climbing 11.5% to £3.64 per share as I write on 27 January. Nearly all of these positive factors got here within the closing quarter following its outcomes launch, which included a second revenue improve within the house of two months.

The corporate’s inventory trades at a trailing price-to-earnings (P/E) ratio of round 31. That’s effectively above the FTSE 250 common of 13. I believe the important thing right here is how effectively the corporate can scale its enterprise mannequin and continue to grow its revenues.

Beneficiary of weaker sterling?

Trainline is kind of clearly specializing in Europe as a progress market. A good portion of its income is generated in euros, which might translate into increased native forex income when sterling weakens.

One other defensive high quality is the group’s comparatively restricted publicity to the US. Whereas buyers are involved about tariffs and different limitations for international corporations within the US beneath the brand new administration, I believe Trainline is comparatively effectively insulated from these.

After all, it’s not all sunshine and rainbows. The corporate is consumer-facing and depends on the well being of the buyer and journey business. It continues to realize market share within the commuter section, which is a optimistic, however there are massive dangers to progress from each client spending reductions and potential new laws within the UK.

Verdict

Trainline’s worldwide publicity and progress potential in Europe depart it well-placed to profit from weaker sterling. Nevertheless, the inventory isn’t one which I’ll be shopping for proper now.

The P/E ratio does look fairly excessive sufficient given the consumer-facing nature of its operations and fierce competitors. Whereas weaker sterling is on my thoughts in the intervening time, I’m investing with at the least a 3- to 5-year horizon. Given the place I believe we’re at within the financial cycle, I’m in search of extra defensive publicity in industries like prescribed drugs once I get some spare funds.