Broker snap: JPMorgan sees 'rapid growth' at Hargreaves Lansdown

15th Nov 2013 12:04

Hargreaves Lansdown's share price received a little boost on Friday after JPMorgan Cazenove initiated coverage on the stock with an 'overweight' rating, saying that the stock's steep valuation is well deserved.The US bank said that the financial services group has established itself as the "pre-eminent direct-to-consumer platform for mutual fund savings products in the UK with a market share of over 28%.Customer numbers, assets under administration (AuA), revenues and profits have all grown rapidly, while shareholders have been rewarded with strong growth in the dividend and share price, it said. "On cumulative net income of £468m in the five-year period [to June 2013], the company has declared dividends worth £437m," JPMorgan said.The bank said that both consensus forecasts and its own estimates for Hargreaves discount continued rapid growth. It said that the stock's rating - trading at a prospective price-to-earnings multiple of 31 - is "justified given the near 100% effective dividend payout ratio and the prospects for medium-term growth in customers, AuA, revenues, profits, earnings and dividends"."We believe that the company's product offering positions it well to continue to exploit structural growth opportunities in the UK for many years to come. The changing regulatory environment will require a material change in the pricing model of the business, but we believe that the same regulatory environment will further aid growth."The bank gave the stock a price target of 1,415p.The shares were trading 0.77% higher at 1,173p by 15:20 on Friday, extending the year-to-date gain to over 72%.BC