AJ Bell finance chief tops up holding

Amid the surge in trading activity among retail investors, it is unsurprising that investment platform providers such as AJ Bell (AJB) have been viewed bullishly. Indeed, shares in the group have risen by almost two-thirds over the last 12 months and sit 25 per cent above pre-lockdown level at the end of February. 

Investors may have further cause for confidence in the group’s prospects. Group finance director Roger Stott and his wife, Julie Stott, have bought combined shares worth around £423,000, at 423p apiece. 

The purchases came just a day after the investment platform provider revealed that revenues for the year to September would be £6m above market consensus expectations of £136m, thanks to elevated levels of dealing activity and the strong rate of gaining new customers during the first half of its financial year. 

That is despite the fact that dealing activity is expected to moderate during the latter half of the year. Consensus pre-tax profit forecasts for 2021 have been upgraded by almost a fifth since the group announced 2020 full-year results at the start of December, standing at £51.6m, according to FactSet. Profit growth is expected to ease to just 2 per cent in 2022, based upon consensus forecasts.

At 444p, the shares are valued at a pricey 45 times forecast earnings. That is a sizeable premium to sector leader Hargreaves Lansdown (HL.), which trades at a multiple of 28. The longer-term shift towards investment platforms by a growing number of savers may prove supportive of revenue growth, but that is adequately accounted for by the market’s valuation. Hold.

Last IC view: Hold, 441.5p, 6 Jan 2021