Today we’re going to take a look at the well-established Hargreaves Lansdown plc (LSE:HL.). The company’s stock saw a decent share price growth in the teens level on the LSE over the last few months. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s examine Hargreaves Lansdown’s valuation and outlook in more detail to determine if there’s still a bargain opportunity. See our latest analysis for Hargreaves Lansdown
What is Hargreaves Lansdown worth?
Hargreaves Lansdown is currently overpriced based on my relative valuation model. In this instance, I’ve used the price-to-equity (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Hargreaves Lansdown’s ratio of 40.77x is above its peer average of 17.85x, which suggests the stock is overvalued compared to the capital markets industry. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since Hargreaves Lansdown’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What does the future of Hargreaves Lansdown look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Hargreaves Lansdown’s earnings over the next few years are expected to increase by 42.04%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? It seems like the market has well and truly priced in Hargreaves Lansdown’s positive outlook, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe Hargreaves Lansdown should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on Hargreaves Lansdown for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for Hargreaves Lansdown, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Hargreaves Lansdown. You can find everything you need to know about Hargreaves Lansdown in the latest infographic research report. If you are no longer interested in Hargreaves Lansdown, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.