This FTSE 250 share has increased by 20% in the month. Its IP/E is still just 3.3. So should I buy?

It’s not often that you see a high-quality company increase profits so cheaply. Yet that is what we have today with FTSE 250‘s Bank of Georgia (LSE: BGEO).

The stock price is down about 20% in a month and 250% in five years. Yet the Georgian bank trades at a low price-to-earnings (P/E) ratio of 3.3.

We have history

So, is this FTSE 250 stock a no-brainer candidate for my portfolio? It’s possible, but it’s complicated.

You see, I was a shareholder not long ago, but I became concerned about the economic implications of the Georgia election. So I dumped the stock.

The election, which took place late last month, was widely seen as a choice between a future within the European Union (EU) or closer relations with Russia.

Georgia’s pro-Western opposition party, officially defeated, has accused the ruling Georgian Dream party of vote fraud. As a result, the country’s move towards EU membership now looks unlikely.

Over the weekend, protesters again clashed with police in the center of the capital, Tbilisi. Therefore, the situation is complex which focuses on the identity, governance, and future of the nation.

This political risk explains why the company’s shares, effectively form the Georgian banking duopoly TBC Bank (another FTSE 250 stock), known for its low valuation.

However, wages are still strong

Despite all this uncertainty, and the imminent Russia-Ukraine war, Georgia’s economy appears to be remarkably strong.

In the bank’s recent Q3 statement, CEO Archil Gachechiladze said: “We do not expect this period to have a major impact on the economy.”

Indeed, the company reiterated realistic forecasts for GDP growth of 9% in 2024 and 6% in 2025. It said this growth would be “supported by strong domestic demand, strong foreign investment, and prudent macroeconomic management“.

In the quarter, the company’s consolidated profit jumped 42.5% year-on-year to GEL 509.3m (£145.3m), with an impressive 32.1% return on equity. Monthly active retail customers increased by 12% to 1.9m.

Bank of Georgia has a growing presence in neighboring Armenia, whose economy is expected to grow rapidly in the future. It acquired Ameriabank for $303m earlier this year.

The group’s loan book increased by 63.4%, driven by the consolidation of Ameriabank and 23.6% growth in its Georgia core business.

Finally, it recently received the title of ‘World’s Best Digital Bank 2024’ from Global Finance.

Overall, the business is doing very well.

My move

Despite the affirmative comments from the CEO, I have to think that the political situation in Georgia is not conducive to foreign investment or tourism.

Tbilisi is a city I wanted to visit, but I was reading the latest blog too Reddit post that the vibe isn’t good there (perhaps not surprising, given what’s going on).

I’m still standing and holding here. Georgia’s business and economy appears to be improving, while the stock is cheap and offers a well-covered full yield of 5.9%.

However there is a lot of political risk, which goes into the incredibly volatile share price. So far this year, it has experienced many ups and downs ranging between 20% and 30%.

Maybe my doubts are all I need to know. After all, there are other cheap stocks that I strongly believe in. When I weigh things, I think I’ll just buy them instead.