AJ Bell PLC (LSE:AJB) shares are down just 6% in 2022 compared to a 37% tumble for larger rival Hargreaves Lansdown.
Last month the UK’s third largest investment platform reported net inflows in its fourth quarter but saw a fall in assets under administration (AuA) for the past year, as declines in markets offset the inflows and growing customer numbers.
The shares were downgraded to 'hold' from 'buy' by broker Shore Capital ahead of the results, with analysts saying, "we love the business, but think valuation is now enough", at a price-earnings premium to its larger rival.
ShoreCap has kept its EPS forecast unchanged, even though the expected AuA is 16-17% lower amid higher rates.
Analysts said the advised and D2C platforms continue to take market share, and the AJ Bell Funds business is "flying" but still a small part of the business at 4% of total assets.
"Both the Advised and D2C platforms continue to take market share, and we believe organic growth, pre any market impact, will be 5-6% in FY23F, even after accounting for much tougher economic circumstances."
The AJ Bell Funds business is also "flying" but still a small part of the business at 4% of total assets, "but performance is great" and net inflows 60% of starting AuM in 2022.
"This will continue be margin-accretive and will in time be modeled separately, as it is at HL."
The broker reckons the forecast consensus likely to rise, with the direction of travel on revenue yields up, net flow expectations are expected to be falling.
"The net seems to us positive, even before any further rate rises, however we note the company’s expectation that it would pass on benefits of any further rate rises."
Valuation is "full", with circa 300p on a discounted cashflow basis, and at 24.5 times calendar 2023 earnings, for a 14% three-year EPS compound annual growth rate.